With fears of a recession mounting, it is becoming abundantly clear that now is a particularly bad time for small businesses, especially those in the restaurant and retail industries.
Tens of thousands of small businesses in the UK are now facing collapses in revenues that could lead to them closing their doors for good. However, that does not mean that you can’t ride out this temporary economic turmoil, or any future cashflow problems that your business might experience.
All you need is an emergency plan in place that is fully costed and will allow you to survive the leaner months and come back stronger than ever. Read on to find out exactly how your small business can survive its next cashflow crunch.
1. Defer Payments Wherever Possible
The first step any small business owner should take is to approach creditors and see if you can defer payments and shore up your safety net. See if your utility provider is willing to defer your next bill payments. If you have any loans for say, vehicles or appliances, immediately contact your providers to see if you can push back payments or arrange a payment holiday. You may be surprised at how flexible many providers can be.
2. Restructure All Repayment Terms
Deferring your payments is not enough to ensure survival. You will need to look at restructuring your existing debts to see if you can secure more favourable repayment terms. The best place to start is with your mortgage, which is undoubtedly a significant drain on your monthly income. Use a free online mortgage advisor service to compare remortgaging deals that will ensure you have more money in the bank to tide your business over. Alternatively, try to negotiate new repayment terms with your provider.
3. Tap Your Line of Credit
If you are experiencing cash flow problems, it is important to remember that you are not alone. Almost every small business in the world has been in a similar position at some point. This is precisely why all major banks provide lines of credit for small businesses, with reasonable repayment terms that will ensure you are in a strong position to bounce back. Lines of credit are the preferred option for emergency financing, often because interest rates are lower than other financial products. Terms and conditions vary massively, but you can often obtain a credit line of anything between £5000 and £1 million.
4. Start a Fire Sale
Now is the time to take stock of what you can sell to free up some cash. Obviously don’t sell anything that is essential for the functioning of your business. But do take a close look at anything which will release some much-needed funds into your business account. Any luxury items, appliances, or furnishings in your business should be the first to go. Consider selling your normal goods and services at a reduced rate if you need a cash injection and are not concerned about making a profit at the moment. Also, make sure to cut any unnecessary spending where you can.
A cash flow crunch is not the end of the world. With agility and nerve, you can ensure that your business will emerge from the next crisis stronger than ever.