12.22.08

Establishing a Business Life Line

Posted in Uncategorized at 11:01 pm by Diana Heeb Bivona

Access to a steady cash flow is a must for any business.  Without an adequate supply of capital, a business cannot pay its employees or conduct the basic tenants of business.  With so many banks either yanking or severely restricting the credit lines of businesses across the country, the issue of maintaining an adequate cash flow has become dire for many. 

Contrary to the reports of mainstream media, many banks argue that capital is still available to credit worthy businesses.  And, if you are looking to tap into that capital, you will need to take a few important steps including: 

  1. Determining your credit worthiness before applying for a loan.  Avoid allowing your cash or liquidity position to diminish.  This has an immediate negative effect on your credit reporting history and acts as a big red flag for banks.  

  2. Reevaluating your business plan and ensuring it is strong and current.  It is imperative to show that you have a realistic plan for the future as well as a plan to repay any monies borrowed. 

  3. Plan for the worst.  Lenders require that you provide a minimum of twelve months of financial projects laid out in a monthly format. The projections need to take into account three possible scenarios:  the best, mid- and worst case scenarios.  Forecasting prepares you to think strategically and helps lenders feel more comfortable in your ability to repay the loan regardless of the circumstances that may impact your business.  

  4. Preparing a two year business look back.  This shows lenders that you are financially strong and are not a fly-by-night operation.  

  5. Taking control.  Given the harsh economic environment, now is not the time to step back and turn over the control of your business to others (or to crawl into the fetal position and cry, tempting as it may be).  You are ultimately responsible for the success of your business; therefore, if you need to pick up the phone or visit customers who are slow in paying their bills, then do it.  Take a closer look at your products and/or services and determine if they are appropriate for the current marketplace, and as difficult as it may be, reevaluate your labor needs. Think long and hard on the decisions you make.  Do not have a knee jerk reaction and begin cutting back wildly.  Surprisingly, eliminating some expenses can often cause more harm than good.  

There is money out there available to businesses, but it will take research and preparation to access it.  Draw on whatever resources are available to you including your local banker, SBA and SCORE organizations.  As cliché as it sounds, it’s important to leave no stone unturned.  

 

 

12.20.08

Where Not to Cut

Posted in Uncategorized at 12:28 pm by Diana Heeb Bivona

Cutting back during these difficult times has become a must for consumers and businesses alike.  Every expense is scrutinized and debated.  Small businesses are also asking themselves hard questions and cutting back on all expenses, hoping to become a lean operating machine able to survive this frigid economic winter.


This is often more easily accomplished by larger businesses that likely have a little “fat” that always needs trimming.  It’s a little more difficult for small businesses and sole proprietors who, in most cases, are already running a tight ship.  It’s a little more challenging in those circumstances as there is little extra that can be cut.  Thus, many necessary tools of doing business are often reviewed such as advertising, travel and office operating expenses. 
Insurance, including liability and workers’ compensation is one such area being closely examined by businesses.  Depending on the business, insurance can be quite costly to maintain, garnering the question, “Do I really need this?”  While tempting to eliminate, you may want to think again.
Ask yourself a few hard questions:

  • If you eliminate your liability insurance, what kind of risks are you potentially exposing your business to should there be an accident or a defective product or service that results in injury or death? 
  • Do you have the cash on hand to handle any potential exposure?
  • Can you and your business survive the fallout from any resulting lawsuits and/or settlements? 

If you can’t survive such an event, and most businesses and individuals can’t, cutting back on your insurance coverage is not the way to go.


You should however take the time to review your current policy and shop around. Often, we become complacent staying with the same insurance company or assume we are getting the best rate because we have been with that provider for a long period of time. This isn’t always necessarily the case.

There is likely a large gap between what you are required to carry by law, what you should carry and what you need to carry in terms of insurance coverage. Talk to your state insurance commission about what you are required to carry and then speak to a few insurance agents and brokers familiar with your type of business who can advise you as to what you should carry in regards to coverage.


This is one situation where if not handled correctly, the cost of cutting back could potentially outweigh any benefit you may receive from cutting back.