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The Credit Crunch. Is there Light at the end of the Tunnel?

Written by: Robin Carlyle

Article Overview: This last month or so has been a depressing and very worrying time for most businesses and business people due to the massive uncertainty caused by the banks financial instability and forecasts of a recession. However, is there now a light at the end of the tunnel?

The Credit Crunch. Is there Light at the end of the Tunnel?

This last month or so has been a depressing and very worrying time for most businesses and business people due to the massive uncertainty caused by the banks financial instability and forecasts of a recession.

It was therefore very good to see Peter Jones (Dragon) on TV on Monday 13th October saying that the news of the banks being rescued is the beginning of recovery and encouraging business people to look upon it being the start of a new phase - to seize the opportunity and look to the future with confidence.

It was also encouraging to see the headline in the Daily Telegraph “Your Business “ page “Banks pledge to lend to small businesses” and in particular, The Royal Bank of Scotland apparently committed to maintain the cash available to “at least 2007 levels”.

What a difference a few days can make!

However, we are not out of the recessionary period yet and it will be important for most businesses, particularly those in the Construction and allied businesses, to continue to batten down the hatches. However, with funds returning to the market place, there is now not only hope of recovery but very definitely probability of recovery in the early to mid part of 2009.

In the meantime and even when recovery does occur, it is essential business people concentrate on cash flow. Profits are fine but without cash flow, you’re dead!

Be sure you keep within the terms of loans, don’t breach covenants. Alert funders to any problems before they occur. The things funders dislike most are surprises. Prepare thoroughly before submitting an application for finance and ensure budgets and business plans stand up to vigorous investigation. Ensure all finance avenues are explored before deciding on which one to take. Remember, finance is just another component within your business process like material and labour.

If you are strapped for cash, consider selling some assets. If you are cash rich, take advantage of low prices and deals on offer.

Managing debtors is vital. Know them before you take them on. Negotiate better terms if you can. Monitor payments closely and take the appropriate action if necessary.

350,000 people are forecast to be made redundant in the coming months. Take advantage of some good people looking for a job.


Review your products and services. Are they what the market wants? What’s the competition doing? Are you competitive?

Release funds by reducing stocks. In recessionary times, manufacturing and delivery times become shorter thus allowing you to carry smaller stock levels.

Finally, if you are in any doubt as to the financial standing of your business, get a “Business Health Check”. This will give you confidence in your business or if necessary, alert you to problems which need dealing with through bringing in a recovery or insolvency specialist.

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Article Tags: avenues, bank of scotland, batten down the hatches, breach, budgets, business page, business plans, business process, cash flow, covenants, daily telegraph, debtors, dislike, financial instability, peter jones, probability, recession, royal bank of scotland, small businesses, vigorous investigation



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