The pandemic has unfortunately hit many businesses right where it hurts. Economists have discovered a current proliferation of businesses who may actually already be "dead inside". Zombie companies earn just enough money to scrape by, acquiring more debt along the way and relying on bailouts to keep going. The problem is that they're unable to afford the cost of the debt and are a high risk to investors. One small blip on the radar, a bad quarter or market event, and they're DOA.
Are you doing business with a zombie company?
According to a recent article in the Washington Post, "companies that fail to book sufficient profits or operating income to cover their annual debt costs for three straight years" are considered zombies. Typically, the industries with the most zombie companies are those with lower investment and lower employment growth. In the late 90's/ early 2000's, Japan noticed more zombies as their banks continued to provide loans to unprofitable companies at low interest rates. The Bank for International Settlements published a paper on zombies sharing that there are increasingly more global publicly traded zombie companies, up to 15% in 2017 from 4% in the late 80s. The EIU also predicts that the pandemic and low interest rates are causing a long-lasting "zombification" of the global economy.
Are You Doing Business with a Zombie Company?
How much research do you do on your clients before extending them credit or choosing to work with them? Did you know that you can run credit checks on businesses? A business credit check will provide information and insights on the business and its ownership. Through this credit check, you can find out:
- Business ownership, subsidiaries and parent companies
- Credit risk
- Credit score and risk factors
- Historical payment history
- Bankruptcies and judgments
Click here to learn more about business credit checks, including how to download a sample corporate report.
What If a Zombie Company Owes Me Money?
If you're afraid of zombies or have already written off "dead" debt, you still have recourse to get paid what's owed to your business. Enterprise Recovery can help attempt to collect for you at no cost for trying! We specialize in business-to-business collections, respecting and protecting your business reputation during the process. We also provide legal assistance if you choose to litigate against your client. Learn more by clicking the button below or contact us if you have any questions.