40 000 Small Businesses in Bulgaria to Go Bankrupt by End-2012
Eleonora, Negulova, Chair of Bulgaria's National Association of Small and Medium Business (NASMB), has suggested that some 40 0000 registered SMEs, or 10% of the total, will go bankrupt by end-2012.
In a Thursday interview for the "Bulgaria On Air" TV station, Negulova claimed that managers were still failing to grasp the impact of the crisis and that it required a new approach.
She insisted that another major problem was intercompany indebtedness which had grown to BGN 100 B, according to recent data.
Negulova noted that the sectors experiencing serious difficulties were construction, the clothing industry, and the sectors which failed to implement technological upgrades.
Several days ago, the Bulgarian Construction Chamber (BCC) reported that some 27 000 small businesses had been closed and over 50 000 jobs lost in Q1, 2012.
According to data of the BCC, intercompany indebtedness amounted to BGN 104 B, while bad and restructured loans amounted to over 26% of the total of company loans by September 30 2012.
Meanwhile, a survey of Credit Insurance group Coface indicated that Bulgaria's bankruptcy rate was 0.12%.
However, Coface warned that the figures did not reflect the full picture in Bulgaria because the bankruptcy proceedings at Bulgarian courts were rather clumsy and the creditors often had no interest in starting them.
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Unfortunately many of these bankruptcies are avoidable because they were businesses that should not have been started in the first place. I have observed so many small shops (in particular) that have started up either selling the wrong products, that is products that are not saleable for the local market where they are situated or the location for the products on sale is totally wrong. Classic examples I have observed is a shop in a nice mall but in a provincial town selling only high brand clothes such as Versace, D&G etc (not fakes but the real thing) or a shop selling high brand fitted kitchens in the same town, they both failed due to the prices being too high for the local market. Shops that open selling the same products (at the same prices) as established businesses almost next door, if you do thiss you must have something to lure away the customer from the established business, better prices or service. Bulgarians need to do a lot of market research and be business wise only that way will we see small businesses succeed instead of going bankrupt.