By: Ami Kassar
Plenty of business owners – entrepreneurs and otherwise – are at risk right now.
Yet business owners may have the ability to take advantage of opportunities arising in these strange times.
That’s not to say you should prey on the misery of others, but there are some things you should be doing at this point that could pay off in the future.
Here are five things to consider.
1. Restructure any debt you have
Ideally, you don’t want to be taking on any more debt these days if you can help it – and that might be a big “if.” Still, there’s plenty of opportunity to reduce your monthly payments.
Your business may be viewed differently now by lenders than it has in the past. For example, perhaps your products or services are still in demand and you are generating increased amounts of collateral, cash flow or credit.
Refinancing should be on your table. Just by shaving a percentage point or two is going to cut your monthly debt service, and put more money in your coffers. In these troubled times, cash is king.
2. The SBA works
Unlike in the past, you might now be eligible for a Small Business Administration-backed loan – or a better conventional bank loan.
The SBA got a lot of attention because of the CARES Act and the Payroll Protection Program, but it’s the agency’s regular lending programs that should interest you. Do note that in its regular programs, the SBA doesn’t make the loans – it only backs them for a select group of lenders.
The flagship 7(a) program offers low rates and fees, and comes with counseling, education, generous repayment terms, lower down payments, flexible overhead requirements and possibly no collateral.
3. Loyalty is nice when it comes to dogs, but not necessarily for lending
At the very least, you need to conduct a debt review to reconsider financing options.
But be careful – your current lender won’t want you to go, especially if the current arrangement is lucrative in their favor. They may try scare tactics, claiming you’ll lose flexibility if you change lenders or that you may risk running out of money.
Resist that pressure. Think of it this way: What’s more important – your business or your lender? Your lender is certainly looking out for itself first. You must, too.
And remember, it’s always possible your lender could rework your deal.
4. Loans (and loan restructuring) aren’t always the answer
More capital isn’t always the answer. Sometimes, it’s better to make do with less.
Entrepreneurs generally don’t want to scale back their operations because they’re too worried about growth. But few businesses grow in a straight line. There are ups and downs along the way and now you might just want to minimize damage.
Steps you might take include deferring or reducing capital expenditures, lease payments, and non-critical vendor payments. By reaching out proactively to landlords, vendors and other contractor holders, you might be able to craft some breathing ground.
On the unpleasant side, you could think about furloughing employees or pay cuts (if you choose the latter, make sure you cut your pay as well).
5. Give yourself some credit
This advice – which isn’t heeded often enough — applies when your company is doing well and when it’s struggling.
You should open a line of credit.
A credit line gives you the peace of mind and flexibility of having a reserve to tap when needed. Say you get a short-term opportunity to buy a stockpile of key, raw material at a ridiculously low price. With a credit line, you can take advance.
Remember that you only pay interest on a credit line if you borrow from it – and there’s no requirement that you do that. The credit line can sit there untouched, if need be.
In summary, now’s a time when your goal may simply be to ride out the next few months. That’s fine. Yet riding out the next few months isn’t the same as doing nothing. By being proactive, you can make the most of a bad time and position yourself for the inevitable rebound.