Top Ten Tips to Survive the Credit Squeeze

Whilst the global credit crunch affects the UK’s Small Businesses there are things that you can do to try and weather the financial storm. Clive Lewis, Head of SME Issues at the Institute of Chartered Accountants in England and Wales (ICAEW) presents his top ten tips to survive the credit squeeze.

  1. Put cashflow and financing on the agenda for every management meeting.
  2. Regularly update cashflow forecasts.
  3. If there is a conflict between profitability and cashflow take the cashflow option.
  4. If you have a term loan or overdraft be aware of any covenants and constantly monitor how close you are to breeching them
  5. Prepare thoroughly if a review is coming up on any of your financing facilities
  6. If limits might be threatened "think the unthinkable" regarding the sale of assets.
  7. Talk to current financiers before you get into difficulties. Otherwise you devalue future forecasts.
  8. Make sure that all types and sources of finance have been fully considered.
  9. Invest time talking to new sources of finance. You might need them if your current providers prove difficult.
  10. If you are "cash rich" draw up a list of ways you could use surplus cash for the longer term benefit of the business.

Speaking about his top tips, Mr. Lewis said:

"Before joining the ICAEW I had been Finance Director of a small public company and I drew on that experience to come up with the above list. Obviously, no two businesses situations are identical. Some business will be unaffected – either directly or indirectly – by the credited squeeze.

In other cases, such as house building, whole sectors will be struggling to avoid a drop in sales. And the attitude of the finance providers differs according to their own situation and their perceptions of the business.

But the credit crisis is not all doom and gloom, as he added:

"Nor will businesses’ experience of the credit squeeze be totally negative. For those businesses which have large cash holdings or significant unused credit facilities, there may well be buying opportunities. In other cases they simply may benefit by a competitor becoming weakened – or even going out of business."

If your small business is actually benefitting from the current situation and would like to share your views, feel free to email or visit the icaew website.

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