Ten Tips to survive the credit squeeze

Ten tips to survive the credit squeeze from the ICAEW's Head of SME Issues, Clive Lewis

Here are my top ten tips to survive the credit squeeze:

  1. Put cashflow and financing on the agenda for every management meeting
  2. Regularly update 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 you could use surplus cash for the longer term benefit of the business.

Before joining the ICAEW I had been Finance Director of a small public company and I drew on that experience to come up with the above list. Obviously, no two business's situations are identical. Some businesses will be unaffected – either directly or indirectly - by the credited squeeze.

In other cases, such as house building, whole sectors will be struggling to avoid a drop in sales. And the attitude of the finance providers differs according to their own situation and their perceptions of the business.

Nor will businesses’ experience of the credit squeeze be totally negative. For those businesses which have large cash holdings or significant unused credit facilities, there may well be buying opportunities. In other cases they may simply benefit by a competitor becoming weakened – or even going out of business.

  • Are these your top ten tips for surviving the credit squeeze?
  • If not what other tips would you include?
  • What has been your experience this far? Do you think trading will get worse?

Also we’d like to hear from businesses benefiting from the credit squeeze prepared to share their successes.

Please email me with your comments – clive.lewis@icaew.com