By Ami Kassar
There is no ignoring a societal crisis, especially one that is global. Particularly in the professional community, it is a game-changer in many ways. Plenty of organizations are dealing with life- and business-threatening situations, and we can only hope for the best.
Yet some organizations, especially those whose current and future prospects are relatively unchanged, have taken advantage of opportunities that have arisen during these challenging times. This is not to say we should prey on the misery of others. However, there are some financial approaches we could be taking that could pay off in the future.
- Debt Restructuring
Ideally, we do not want to be taking on any more debt these days, if possible. However, this may be a big “if” for many establishments. Still, there are plenty of opportunities to reduce monthly payments.
Companies may be viewed much differently now by lenders. For example, perhaps an organization is now generating increased amounts of collateral, cash flow, and/or credit. Even with a pandemic slowdown, an organization’s products or services may still be in demand. This may create the potential for debt restructuring.
Just by shaving a percentage point or two will curb monthly debt, which will generate additional savings. And in these troubled times, cash is king more than ever.
- Loan Obtainment
Unlike in the past, more organizations may now be eligible for government and conventional bank loans.
The Small Business Administration (SBA) loan gained a lot of attention due to the CARES Act and the Payroll Protection Program, but it is the agency’s regular lending programs that may interest eligible companies. 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 it comes with counseling, education, and generous repayment terms. In addition, lower down payments, more flexible overhead costs, and no collateral may be also figured into the equation.
- Debt Reviews
At the very least, organizations may benefit from conducting a debt review and reconsidering finance options as they stand now.
That being said, establishments will need to be careful. , especially if their current arrangements are lucrative in their favor. They may try scare tactics, claiming companies lose flexibility by changing lenders, or that organizations may risk running out of money.
Resist that pressure. What is more important – your organization or the lender? Lenders are certainly looking out for themselves first. Companies must, too.
- Cut Spending
More capital is not always the answer. Sometimes, it’s better to make do with less.
Organizations generally do not want to scale back their operations because they are too worried about growth. But few companies grow in a straight line. There are ups and downs along the way, and now, some organizations may want to simply minimize the damage.
Organizations may defer capital expenditures, reduce lease payments, and minimize non-critical vendor payments when possible. By proactively reaching out to landlords, vendors, and other contract holders, companies may be able to find some breathing room.
- Open a Credit Line
This advice – which is not heeded nearly often enough – applies both when organizations are doing well and struggling.
A credit line may give companies peace of mind because they are backed with funds they can borrow, if need be. And it may give them a great deal of flexibility. Say a company has a short-term opportunity to buy a stockpile of a key raw material at a ridiculously low price. With a credit line, they can take advantage of this opportunity.
Remember that interest only needs to be paid on a credit line if money is borrowed from it – and that is optional. The credit line can sit there untouched, if preferred.
Riding Out the Storm
In summary, now may be a time where companies are simply aiming to get through the next few months. However, these five methods may put organizations in a better financial spot as we get back to business.
By taking proactive measures, companies can not only make the most of a bad time, but also reposition themselves for an inevitable rebound.
Ami Kassar is the founder and chief executive officer of Multifunding LLC, speaker, and author of The Growth Dilemma.