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How small businesses can survive difficult times


Our small business bankers, like those at other banks, are hearing two main concerns from customers these days: They want to know what it takes to obtain loans, and they want help managing expenses and cash flow.

In these uncertain economic times, it’s more important than ever that small business owners look for every opportunity to manage expenses.  Doing so can help yield a good payoff managing cash flow and credit needs.

If you need help analyzing your balance sheet, and sorting through your expenses, it’s time to call a trusted professional. Talk to your small business banker or financial advisor. Be proactive: if they’re not calling you, call them.

Here are several specific points of advice:

– Reconsider every expense–Look carefully at each expense line of your budget, and find ways to cut costs that are not absolutely necessary for the bottom line.
– Trim inventory levels.
– Allow positions to remain unfilled if staff leaves or consider part-time, temporary or consulting services for support.
– Recycle or sell machines that you use only occasionally. Negotiate to lease or rent equipment and software only when you need it.
– Negotiate to lengthen payment terms or earn discounts with long-time vendors.
– Trim the luxuries. Perhaps it’s time to reconsider providing meals for every meeting.
– Be conservative about seeking credit. Review all outstanding credit on your books, and if you decide to pursue new credit, go beyond the application to document in detail how you’ve cut costs and managed for success.
– Consider refinancing. Watch for a rate that best suits your situation, and ask your banker to alert you to falling rates.
– Manage your budget. Create weekly reports to monitor expenses. Quickly step in to investigate spending that exceeds the budget, and take steps to curtail it.

You should examine the revenue side of your business, too.
– Weekly revenue reports. Step in immediately to investigate shortcomings. Find ways to celebrate and replicate success that exceeds your goals.
– Clients. Is there business you’ve turned away in the past because it was “too small?” No account is too small in today’s environment, provided the work you do for them generates a profit.
– Collect faster. Speed up collection of your merchant services accounts. Aggressively collect receivables and reign in credit and terms.
– Cash accounts. Look for a strong bank, and match deposit rates against a bank’s strength. Consider depositing operating capital in small business premium money market funds, and long-term capital in 12-month CDs.

Banks are looking for small business owners who know how to tighten their belts, who can demonstrate a positive cash flow, solid management, and who have good personal credit behind the owners.

– Joseph Benoit is the small business banking executive for Union Bank, N.A., a full-service commercial bank providing an array of financial services to individuals, small businesses, middle-market companies and major corporations.