Thousands of Small Companies Facing Bankruptcy

It's not "the tycoons" who are in danger of collapse, it's the small businesses that provide most of Israel's jobs. About 4,000 of the country's 40,000 small manufacturers are in danger of going out of business, and 12,000 workers have already lost their jobs at these companies, according to a small-business organization.

"Small manufacturers urgently need at least NIS 1.7 million in credit to survive," said Yehuda Alhadif, the president of the Association of Craft and Industry. He based his remarks on an ACI survey in which 49% of small businesses say they urgently need loans to continue operating. The ACI represents around 40,000 small manufacturers, each employing 20 people on average with NIS 6 million in annual revenues.

The survey shows that the average small manufacturer needs about NIS 298,000 in new loans; 52% of those surveyed said they need more credit now than before the economic crisis. The banks have approved more loans for 22% of the firms, while 30% say the banks have refused them more credit. Some 60% say their situation is worse than before the crisis, with 39% saying their situation has not changed.

The companies surveyed represent a wide range of industries including electronics, textiles, food, construction and infrastructure.

Alhadif said the half of the small businesses not in a serious credit crunch enjoy a high level of financial planning, a broad base of loyal customers and conservative management.

He explained that most of those not complaining about a downturn in business took strategic steps in recent years; for example, investing in new products or seeking new market segments.

Over half of small manufacturers have let workers go, firing an average of 30% of their workforce. Only 5% have added staff, and only by 5% on average.

Two-thirds of the small manufacturers say their sales are down, both in Israel and overseas, and 71% say their order book has shrunk. Only 2% have seen an increase in orders, and that only by 5%.

Most small manufacturers are planning cutbacks this year, with 13% saying they will have to close up shop if the recession continues much longer. Only 6% say they are expecting to expand as various development projects and investments bear fruit this year.