Many small business owners have turned to selling goods and services to the federal government and political subdivisions as a way to be sure they have credit worthy customers. In general, this is a good strategy, but it is wise to know how solvent your municipal customer is. For the sake of this discussion, I am going to include school districts, water supply districts, hospital districts, community college districts and other small publicly financed political subdivisions in the same category as “municipal customers.”
Many state governments are having an increasingly hard time balancing their budget. By law, state governments can’t spend money they don’t have, so those states that have a significant shortfall are making tough decisions to curtail services and cut government. Last year when the
Local governments aren’t allowed to issue IOUs. Cities, hospital districts, water districts and other political subdivisions are being hit hard by shrinking property taxes and sales taxes that have plummeted. This year we may see a number of these taxing authorities file bankruptcy. Last year there were several municipal bankruptcies including
Fast forward to today. The largest city on the horizon with very serious financial problems is
What is important to realize is that cities and other governmental entities have credit scores and bond ratings just like large companies do. Credit metrics can be used to help you keep your eyes open when selling to a city or other small political subdivisions.
Check the following resources to obtain information about political subdivisions smaller than the state level:
D & B (the parent company to AllBusiness.com) keeps credit records on cities, school districts and other political subdivisions. D & B has various packages and reporting services depending on your needs.
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