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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
Loan Secrets
http://www.smallbusinessloansecrets.com |
