Each week, our managing director and broker extraordinaire Mark Smillie prepares a brief post packed full of wisdom gained from his years in the finance industry. Join us in reading on, and discover some of the tips and tricks good brokers have developed when finding the best finance for their clients!
The Corona Virus and business finance
I was in a group of highly successful company directors on Friday and we were discussing the effects of Corona virus on businesses. The conversation quickly turned to how to make sure their business survived. Subsequently, they were keen to act before they had a problem! After all, we all want to avoid panicking with everyone else (think toilet rolls in supermarkets)!
These were some of the key points.
- The main reason why a business goes into Liquidation is because they run out of money. It’s as simple as that.
- One of the biggest killers of a business is bad debt. and customers not paying their invoices on time.
- Retail or Hospitality have the additional worry of no customers coming through the door.
What the directors in the group were focusing on was what if an ‘Italy scenario’ suddenly happened to them? Italy has had rapid escalation since Friday, when we spoke about this.
Retail and Hospitality would be a nightmare, no customers. Construction manufacturing and virtually all sectors would see many businesses would come to a stop.
- How are the staff and your materials going to get to you?
- Will employees will just not turn up for work, going into self isolation for 2-3 weeks?
- How many of your clients are not going to be paying their bills?
- Companies that are struggling to pay your bill now, how will they cope?
The directors in the group asked themselves some tough questions.
- What would happen to their business if cash just stopped coming in?
- What would the effect be on them?
As one said; “My family are totally dependent on the success of my business. The mortgage, car repayments, three high maintenance children. Every part of my family life would be effected if my business suffered!”
There answer to these issues, was to make sure their business did not run out of money and to increase their financial reserves in the next few days.
If you’re familiar with my content, you should already know that you should never leave asking for money until you really need it!
The banks are unlikely to be there to help small and medium size businesses quickly. Most finance companies look closely at your bank statements. Therefore, you really do not want to approach them when your most recent ones are showing a lack of income.
You also do not want to approach them when everyone else does! Supply and demand, think toilet rolls in supermarkets.
If all businesses rush to borrow money at the same time, it will be in short supply and costly if you can get it at all. The forward thinking company directors are getting their finance in place, before everyone else, they are doing it today.
A good broker will have solid connections with senior management and the directors at the finance companies, I have been dealing with them for over 20 years, you give your best customers priority service and your best deals, it is the same with a finance broker.
You should only use 1 broker though, you do not want multiple applications going out, leaving financial footprints behind.
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Please call me if you want to discuss your options on 0800 612 5364 or 07710 466166
Let’s talk today.
Very best wishes
Mark Smillie