Hello everyone and welcome to Value Capital Funding’s podcast, “Insights Into Better Business Financing”.  My name is Jeff Kornfeld, and I’m one of the principals here at Value Capital Funding, a family-owned and operated, full-service commercial financing firm located in beautiful Boca Raton, Florida.  We’re here to bring you timely information and tips to help you navigate the vast, and sometimes confusing, world of small business finance.  

We invite you to contact us to discuss YOUR business’s financing needs at any time.  You can reach us by phone at 800-944-6280 or visit us on the web at www.valuecapitalfunding.com, where we also index these podcasts in case you missed any of them, or if you just want to listen to any of them again.  So, without further ado, let’s start today’s show…

Today’s topic is especially timely as the coronavirus continues to spread across the globe.  So, let’s talk about…The Coronavirus’ Market Impact And Why it Matters to Every Small Business.

World equity markets, meaning stock markets, have seen greatly increased volatility due to the impact of the coronavirus.  The US stock market has literally had BOTH daily losses AND daily gains of almost 5% each way all within a matter of just a few days.  Why?  FEAR, HOPE, BOREDOM & GREED.  These are the 4 emotions that drive investors, and money managers, to move money in and out of the markets.  Today we are going to focus on FEAR & GREED because that’s what’s at the heart of the coronavirus moving markets.

Let’s focus on the FEAR first.  Because of FEAR of the coronavirus spreading:

  • Many flights into and out of southeast Asia, and China and S. Korea specifically, have been cancelled which has slowed or stopped commerce to and from those regions.
  • For those in China, and now some other countries as well, quarantines have been imposed which has stopped many from going to work, or any other location outside of their homes.  This has slowed demand for many products and services, not just in China, but around the globe.
  • Travel, both inside and outside of infected regions, has slowed with expectations to see more slowing in the coming days, weeks and months.
  • Cancellation of numerous large public events like The 6 Nation’s Rugby Match sporting event, conferences like Facebook’s Worldwide Developers Conference, political summits like the Association of Southeast Asian Nations Summit, religious pilgrimages to Saudi Arabia’s city of Mecca.  All cancelled.  Even the Olympics is not immune with reports saying that if the virus is not adequately contained by May, then the Olympics are also in real danger of being cancelled.

In our opinion, it’s time to transition your business, no matter what industry you’re in, from OFFENSE to DEFENSE in response to the changing economic climate.  This is especially true for economically sensitive industries like manufacturing, construction, travel, hospitality and many others.  Since the end of the Great Recession in 2009-2010, the US overall has mostly enjoyed an uninterrupted steadily improving economic backdrop that has led to all-time lows in the national unemployment rate. As fellow business owners, we’ve seen this translate into a shortage of qualified skilled labor in the workforce.  We actually can’t find enough qualified workers to fill all of the open positions in this country.  We’ve actually been in an economic boom now for about 10 years.  But FEAR can change all that, and rather quickly.

So, what happens when FEAR translates into economic downturn?  Sustained economic downturn.

To answer that question, let’s get back to the stock markets and let’s talk about that second emotion…GREED.

With the markets being so volatile here in the US and interest rates collapsing to new all-time low yields, how will this affect businesses here in the US?

Fear of economic financial loss and fear of the unknown can drive an economy.  Will you be ready for the possibility of a tough road ahead?

Greed will make your competitors take action NOW in preparation for economic tightening.  GREED is not always a bad thing.  It’s what will drive savvy business owners to seize their competitive edge NOW seeing the economic glass as half full instead of half empty and use this as an opportunity to prepare for the worst.

If an economic slowdown is coming, we’ll all have less to spend on everything.Is YOUR business dependent on a strong consumer?  How about a strong economy, and whose isn’t these days?  If so, you may want to put up your antennae and pay very close attention because

I’d like to transition now into our final segment entitled “Proactive Strategies EVERY Business Owner Should At Least Consider Before the Coronavirus Infects YOUR Business”.

First:  Increase Your Financing Capacity NOW.  Let’s face it, lenders are people with emotions too, and they experience FEAR & GREED also.  Historically speaking, lenders as a class, always lend way too much at the top of an economic cycle, and not enough during downturns.  If you’ve lived through these cycles before, then you know financing offers for your business are always plentiful when times are good.  But how about when things slow down?

Not so much, right?  So, before you have a dire need for financing, and before the lending community tightens lending qualifications and loan sizes, TAKE ACTION.  We liken it to a squirrel gathering nuts for the winter.  Everyone knows that a squirrel will gather all those nuts, and store them up in ADVANCE of the cold harsh winter ahead.   I think you know where we’re going with this, right?  Well, just like that squirrel, we advise ALL business owners to make sure that you bolster your available financing facilities NOW, and BE CONSERVATIVE with the amount you think your business will need to survive.  Because we’ve seen it happen before and we’ll see it happen again.  During The Great Recession from around 2007-2009, many, many businesses who were in good standing with their lending facilities had their credit lines cut by 30%-50%, and new applications for credit were being declined like crazy.   It was almost like there was no available business financing out there unless you were a Fortune 500 company!   The very valuable lesson we learned from that is to be like the squirrel.  Bolster your business credit facilities NOW, in ADVANCE of what can very well be an economic WINTER coming just ahead.  What’s your downside?  NONE.  You’ll have the extra borrowing capacity whether or not we have a lingering economic downturn.

How about the flip side though, meaning you do nothing, make no preparations, and we get the equivalent of an economic winter, how would your business fare then?  Only you know the answer, but for many, the stress level alone would kill them.  So, why do it the hard way when there’s an easier way?

Second:  Refinance ALL of the high cost debt on your books NOW.  Use the decline in bond yields and market rates to refinance your “cost of financing” if possible.  That makes common sense right?  So, be opportunistic and view the decline in market rates as a silver lining.  Consider refinancing not only your business debt, but your home mortgage too.  Remember the glass is half full, not half empty.  It’s all a matter of perspective, right? 

Lastly:  Manage Your Accounts Receivables More Closely Than Ever.  If your business sells goods or services to other businesses, and has to wait days, weeks or even months to get paid, then those outstanding amounts due to YOUR business are called Accounts Receivables.   “Factoring” is a business financing technique where you utilize your accounts receivables to create much needed liquidity today.  It was said to have been brought to America by The Pilgrims in 1620…can you imagine that?  In fact, it’s used in a wide variety of industries, from construction, to wholesale, to manufacturing, to staffing and just about everything in-between.  Most importantly, Mr. & Mrs. Savvy Business Owner, it’s SECURED financing, which usually has much better terms than unsecured financing, and can help you manage your cash flow and be better prepared for coronavirus-induced tougher times ahead.  Also important…going forward, start looking for slow payors and have a strategy in place now for when your “average days outstanding” start to increase, as they surely will with a slowing economy.   This is important because accounts receivable are more valuable the younger they are.  The closer they get to 90 days old, the less likely a finance company will view them as collectable, and they will be greatly discounted.  Accounts receivable over 90 days will not even be accepted for factoring, so now more than ever, keep your eye out for those customers elongating their payment cycles. 

The Bottom Line Is This:  At best we’re in for a tricky time period ahead in the US Economy and in the global economy as well.  Between the Coronavirus, and the upcoming US election, there’s bound to be some hesitancy or pause coming to the economy.  THAT just makes common sense, and that’s a best-case scenario.  What if things get a bit more dicey, and NO we’re not alarmists, but just WHAT IF that slowdown becomes a real recession?  How would YOUR business fare?

Be PROACTIVE by being the squirrel and prepare now.  You will certainly have a better chance of surviving the winter and thriving come spring!  And remember, stay optimistic, opportunistic, and nimble because This Too Shall Pass!

Well…that about wraps it up for today folks.  Thanks for listening to Value Capital Funding’s podcast, “Insights Into Better Business Financing” with me, Jeff Kornfeld. 

We invite you to contact our dedicated group of professionals to discuss YOUR business’s financing needs.  You can reach us by phone at 800-944-6280 or on the web at www.valuecapitalfunding.com.  

Value Capital Funding, where our mission is to help businesses like yours secure affordable financing simply and quickly!  We hope you tune in again next time everyone!  Bye for now.