Business Loans and the Credit Crunch:
How to Get Your Small Business Loan in
Tough Times
With the continuing talk of a global credit
crunch many small business owners have been wondering if and when it could
hit them and how it could affect their plans for the future. Whilst small
businesses are generally immune from any direct fallout, the sort of
nervousness seen in the market place can indirectly affect even the
smallest of businesses.
During the good times there is a feeling that
nothing can go wrong and so as long as business owners have a half decent
idea and good security or collateral to back it up, then they have no
problem in obtaining finance. But once the ‘feel good factor’ ebbs away
then attitudes can slowly change over time.
All is not lost though! There are still some
steps you can take to persuade your bank manager to either support your
new business idea or support your expansion plans. Here are some of the
things you can do.
Review Your Plan or Idea
All the best plans in the world change over
time as the general business climate changes. Nothing ever stays still and
the businesses that survive know that their market never stays still.
Take a step back and examine whether your
market has changed. Have recent events dented the confidence or purchasing
ability of your target market? Will your customers be thinking twice about
ordering your all-singing-and-dancing product or service? Will they no
longer be able to accept your high price even taking into account your
quality service? Have your costs significantly increased rendering your
idea or business unprofitable?
You must not make the assumption that because
your plan was viable a few months ago that it is still viable today. Be
wise enough to re-look at all the underlying factors that made you come to
the conclusion it was a good idea. Is it still such a good move?
Write a Business Plan
So many business owners still don’t write
business plans; they don’t see the value obtained in exchange for the
amount of time invested in researching and writing one. Even in the good
times banks like to see a Plan but during times when banks may need more
persuading then a Business Plan is essential.
Whilst many regard Business Plans as documents
written solely for the bank this is not the case. A Business Plan must be
seen as a tool which can act both as a summary for the bank and as a
control and check for you. A well researched Plan will help you understand
the pitfalls of your new venture; it will highlight the flaws in your
thinking and potentially save you from making an expensive mistake.
Before you approach the bank commit to writing
a Business Plan; it may be less painful than you think!
Watch Your Cash Flow
When the business community starts talking
about downturns and that dreaded ‘R’ word sometimes the talk can become a
self-fulfilling prophecy! Businesses can quickly decide to tighten their
belts and soon your orders dry up and it takes longer for you to get paid
for work you have already done. Cash becomes tight.
You need to be prepared for this. Review all
your expenses. Do you really need all the ‘toys’ that go with running a
business today? When did you last review your supplier’s pricing? Are you
still getting the best deal in the market? Are your payment terms very
clear such that all your customers know that if your invoice says 30 days,
then you mean 30 days and not 60 days!
The vast majority of business failures do not
arise because of lack of profit, it is usually down to lack of cash. Cash
is the life blood of all businesses and without it businesses die. Don’t
fall victim to this one; watch your expenses and chase the cash.
What does this have to do with getting the
bank on your side? Simple. Your bank likes to see a well run account. It
does not want to see an account that is under pressure and it certainly
does not want to see itself returning your payments due to lack of funds.
In times like this you need your bank working for you, not against you.
Talk to Your Bank Manager
If your business is beginning to suffer for
many owners the natural tendency is to adopt the ostrich position – head
in the sand! Problems do not go away by themselves, no matter how hard you
try to convince yourself.
If your problems are beginning to affect your
business then one of the first people you need to go and see is your bank
manager. The old saying, ‘Forewarned is forearmed’ is so true. No one
likes surprises sprung on them and a banker is no different. You must
share your concerns and who knows, they may even be able to help you!
Hiding away from the Bank is no solution. A
lack of facts or being kept in the dark is a sure way of creating panic
and this can lead to incorrect and disastrous decisions being made. Avoid
this by talking and informing.
Banks can be known for making life tough but
you have a part to play. Make it easier for your bank to support you by
providing them with all the necessary information they need and don’t
forget that you have your part to play by taking the right decisions for
you and your business.
Robert Warlow
Small Business Success
http://www.smallbusinesssuccess.biz
