Insolvency Risk Rising

CreditorWatch’s latest Business Risk Index is showing that higher interest rates and inflation are squeezing small business cash flow and have increased payment defaults to a two year high, according to the Australian.

• They’ve been declining on average 20% m/m and late payments to small businesses are three times higher than to large ones. Trade payment defaults are a lead indicator of involvencies, according to Creditor Watch. Payment defaults are highest in the retail, construction, transport and hospitality sectors.
• Also expected future income has fallen 18% to be the lowest in a year.
• Insolvencies fell for the third consecutive month but liquidator appointments are creeping up to pre-Covid levels. Insolvency protections in place during the pandemic are being unwound.
• The KordaMentha survey with the Turnaround Management Association found that a third expect Australia to dip into recession over the next year and that 75% of M&A transactions will involve distressed assets.
  - The Australian