Credit lines in the sand

It's tempting to believe that the credit crisis is nearing an end. I hear it too; many of you know that I'm an avid CNBC watcher and their stance, more often then not, is that the worst is behind us. I'm afraid that I disagree. The worst is yet to come. The reason? The tighter belts at the banks and slowing credit hasn't had enough time to really impact businesses ...yet.

I wrote a post a few days ago quoting an article wherein they stated that bankruptcies were up 49% year-over-year. I'm afraid that even that is only the beginning, but it is an indication of what is yet to come.  Businesses, especially growing businesses, rely on their credit lines to get them through the tough times. We're in one of those times now, but the credit lines won't be there to provide the businesses with the cushions that they need.

In stead, businesses will begin to see their cash reserves dwindle as their sales and revenues decline. Of course, no business, especially new businesses, can react instantly to changing market conditions. As a result, fixed costs will remain at their original levels for some time and those fixed costs will need to be covered - if not by revenues, then by what? The credit lines won't be there... Put one and one together and you begin to see the picture that's developing nationwide.

The credit crises, or at least what started it initially, may be nearing an end. Unfortunately, the effects of that crisis are only now beginning to be felt and it will take time for their full impact to reach the bottom line.