The corporate credit crunch

Ten tips to survive the credit squeeze

News of the three-part package to bail out the banks in an attempt by the government to restore confidence in the financial markets and encourage them to lend to each other again will come as welcome news to many business owners. But until the credit lines start flowing again, it is prudent for businesses to keep a close eye on their financial positions. Here are ten tips for surviving the credit squeeze.

1. Put cashflow and financing on the agenda for every management meeting.

2. Regularly update your 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 in which you could use surplus cash for the longer-term benefit of the business.

Source: ICAEW 2008