Planning for a pickup in sales, some small manufacturers borrowed money from their larger counterparts to ramp up production, Bloomberg reported yesterday. Now, a growing number can't pay for the investments as their forecasts aren't panning out, with energy-related companies being among the hardest hit. Credit managers for the manufacturers who are owed the money are reporting that more of their clients are so far behind in their bills that the "act of last resort" is being taken: hiring a collection agency to recoup money owed, said Chris Kuehl, an economic adviser for the National Association of Credit Management. The main culprits of this financial distress are small energy companies who supply large oil firms. When planning for this year, many of these companies expected the price of oil to rebound. This "unjustified optimism" has left many of these companies in bad shape, Kuehl said. There may be more strain ahead because credit managers “live in the future,” forecasting whether customers can pay invoices as many as four months from now, and evidence is building that more energy companies are finding it increasingly difficult to make good on their debts.
