12% of Companies at Risk of Failure

Accessing financing is main problem, says business data firm BdiCoface.

Israeli companies were in worse shape in the second quarter of this year than they were either in the first quarter or the second quarter of 2011, data released by BdiCoface showed.

The business data company said on Sunday that 11.9% of all the companies it surveyed were in a "high risk" situation, which means they are at risk of failing, while another 28.9% are at "above average" risk.

Business risk as measured by BdiCoface's index, which has a range of one to 10, with 10 being the highest level of risk, was at 6.25 in the second quarter. That was up from 6.09 in the first quarter of the year and 5.82 in the second quarter of 2011, the company said.

"The increase in company risk in mainly due to financing difficulties," said Eyal Yanai, BdiCoface's CEO. "The banks have tightened their criteria for credit and the capital markets have dried up completely as a source of financing.

In addition, prices for raw materials and components are rising, which is occurring amid concerns about higher prices resulting from the social protest and lower profitability. These are, of course, all having a negative impact on business."

Yanai said Finance Minister Yuval Steinitz's steps to narrow the budget deficit are also sending a negative message to business that the economy is in crisis.

As a result, businesses are reducing costs in expectations that revenue will be declining and credit will become even harder to obtain.

In spite of generally worsening conditions, Yanai said late payment of bills has remained stable in the second quarter, at 10 days. That could be due to the tightening availability of credit, which has caused companies to extend repayment terms from an average of 92 days to 94 days.

In the second quarter of 2011, companies were extending credit an average of 91 days while the average unapproved delay in payment was just five days. The rates have been climbing steadily since then.

Restaurants and cafes continued to be the weakest business sector in the second quarter, as they were still suffering the highest levels of risk, although the risk level had slightly improved in the second quarter, to 6.98 from 7.04 in the first quarter, according to BdiCoface.

The next riskiest was the tourism and hotels sector, where the risk index was at 6.81. The least risky industry was chemicals, where the index was just 4.98, BDiCoface said.