Ravi Chandran
Small business owners struggle to survive in a slowing economy, but dealing with it sensibly can save you many heartaches.
By: Nithila Vijayan
The Ministry of Trade and Industry (MTI) on May 21 revised downwards Singapore’s GDP growth for 2019. MTI said that taking into account the performance of the Singapore economy in the first quarter, as well as the weaker external demand outlook for Singapore, the GDP growth forecast for 2019 is narrowed downwards to “1.5 to 2.5 per cent”, from “1.5 to 3.5 per cent”.
When the economy is slow, small business owners struggle to survive, many for the first time.
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Financial problems consume valuable time and business resources, yet must be dealt with proactively. Small business owners should use the resources their lender provides. Remember, the lender has the expertise and cares about your business and its financial well-being. No lender wants to see small business owners struggle.
These are some tips which may help a struggling small business owner.
1. In tough times cash is king. Have a close look at every purchase you need to make, and decide if it is worth the money. Will the product generate enough cash to pay for itself? If not, don’t buy it. But also remember that businesses need to borrow when they don’t need the money. If you are looking for loans when you are down and out, you may not get it so easily.
2. Let your budget show the way. Without a budget you will find it difficult to cope with hard financial times. Adapt it regularly and do the same with your personal expenses. If you don’t keep track of expenses, they will become a bottomless pit into which all your cash will disappear.
3. Look at your business’s financial position and performance objectively. Do you get maximum returns from your investments? Could you sell those that are not making you money? When times are hard, survival is the only goal.
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4. Examine how your debt is structured. If you have an imbalance between short term and long term debt you should restructure your long term debt so that you can pay back the short term debt over a longer period. Be careful not to take a loan against long-term assets, except if you are in critical need of money.
5. Prepare for your meeting with your lender. Make sure you have all cash flow and balance sheets and inventories at hand for your lender. That will make your review time more productive. Write down any ideas regarding your financial position and discuss them with your banker. Once again remember that no lender wants to see small business owners struggle.
6. Ask your lender about government guaranteed loan programs for small businesses. Your lender or a good loan specialist could be able to restructure your business debt over a longer period if a government loan programme is prepared to provide a credit guarantee on your loan to the bank. Ask your loan specialist about any additional resources which may be of use to your business.
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7. Review your insurance coverage. Increase your deductibles and your premium will decrease. Items that are low-risk or obsolete should be removed from your inventory list.
8. Examine your life insurance policies. Some whole life policies have provisions that enable you to borrow against the cash surrender value at very low rates, or you could deduct the cost of the premiums from the cash surrender value. Determine whether your life insurance is worth the money or whether you couldn’t get by at a lower cost. Make sure all key personnel in your company have life insurance so that business can continue in any of the key players’ absence.
9. Deal with financial problems immediately. As soon as a financial problem arises, deal with it immediately. Keep your loan specialist informed of any problems and make him part of your inner circle of confidants. Use your team as a soundboard to discuss financial difficulties and brainstorm solutions. No loan specialist wants to see small business owners struggle.
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10. Get some perspective. Sometimes you need to get some distance from your work to solve the problems. Take a weekend off or go and watch a movie – whatever you do, leave your worries behind for a short while and focus on something else – it will make you and your business a lot stronger.
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