These are certainly trying times. Now more than ever it is imperative that you communicate often and honestly with your creditors. Keep those lines of communication open. Be accessible. This is true both for your business and personal credit.
We are all in this together. With some exceptions, you are experiencing lower income and cash flow. You may have problems meeting financial obligations timely.
Guess what. So do your creditors. They are in the same predicament. And most likely they have creditors, too.
Stay on top of your cash flow. Budget your cash flow. Have plans and schedules in place for payments. Then communicate with your creditors. If you need concessions, the honest and open debtors get the most accommodations.
From a personal perspective, utility companies have relaxed requirements. And they can’t shut off power during this interim period. Mortgage lenders have started to work on delayed payment plans. The same is true for auto loans, both on new acquisitions and existing debt. Make sure you preserve your credit scores with the bureaus. If you have renegotiated payment terms, your credit score should not be negatively affected. You will need good scores on the other side of this crisis.
Now from a business perspective. Did I say talk to your creditors? Keep them in the loop. Communicate often and honestly. If you reach a mutually acceptable plan, honor it! The less a creditor worries about you, the more favors you can curry down the road. The creditor just wants to be repaid for their product. Look at your fixed monthly payments as well, such as rent, equipment loans, etc.
Then there are and will be more government guaranteed lending programs. Learn about them from your banker or accountant. They may be appropriate for you. There are other creative lending sources as well.
Managing your cash flow is critical during these times. If you collect money from a customer and don’t have a plan to repay creditors, you can easily run into the concept of “robbing Peter to pay Paul.” Then you may not have the cash to pay Peter, particularly if you are losing money. You will never be able to catch up unless you have real profits and/or infusions of new equity, such as a personal loan to your company.
If you are in this for the long haul, keep those communication lines open.
A 1975 graduate of the Wharton School at the University of Pennsylvania, Harvey enjoyed a 20+ year career in commercial banking, exercising his “golden parachute” in 1996. In his volunteer life, he is a past chair of the Small Business Banking Unit of the American Bankers Association, Easter Seal Society of New Jersey, the SAAGNY Foundation, PPAF EXPO, and Supplier Committee of PPAI. He is also a past President of PPAF. PPAI awarded him the H. Ted Olson Humanitarian Award in 2013.