While franchises generally are more stable than non-franchised businesses, all business owners need to have a healthy respect for the economic environment we are in and truly understand the secret to setting themselves up for current and future capital needs. We have seen first-hand how businesses of every type are floundering their way through the new world of accessing credit. Because of our consistent ability to secure capital, we have been able to help many franchisees obtain financial services throughout the current recession. We are very active in this space, are members of the International Franchise Association and help a significant number of franchise concepts including Subway and Burger King.
The Franchise Credit Crisis
Last week we wrote about the combination of factors in the credit markets leading to businesses of all sizes having trouble accessing the capital they need to expand, grow or start businesses. Just last month, FRANData released a study analyzing the impacts of the credit crisis on the franchise sector. The study concluded that “lending could be reduced as much as 40% from 2008 estimates”, which is similar to conclusions we recently made about capital availability. Even if your franchise doesn’t need capital right now, this data is pretty conclusive evidence that you should be proactive in planning for your capital needs.
What To Do About It
Focus on the positive. Tuning into any news outlet, it’s easy to adopt a negative attitude. So, in addition to reading the negative and pessimistic news about capital availability, make sure you balance it with the positive news that is also out there.
Focus on your critical financial ratios. If you haven’t already read it, Managing by the Numbers is a good primer for business owners to understand their company’s financial performance. A business without healthy cash flow is doomed to failure, so if your in this position take action now to insure a more stable future. If your cash flow is good then take advantage of your healthy position and investigate your financing options now, or at the very least protect your healthy credit.
Ask some tough questions. Every business owner needs to make sure they can access affordable capital, even if it is not needed right now. If your business financial picture is solid, there is no better time than now than to seize the situation and answer these questions when you want to, rather than when you need to:
- How will I access capital if my bank cuts, or shuts off, my credit lines?
- How will I access capital if my business credit card reduces my limit or closes my account?
- What can I do today to set up myself up for future cash flow needs.
Let us know if we can help provide answers to these questions. We try to provide business owners, whether your a franchise or not, helpful tips and tools to get you through this recession and have included a few below that are worthwhile to review:
- Timeless Tips for Managing Cash Flow and Risk
- 9 Ways your small business can benefit from the stimulus package
- Small Business: Ignore these tips at your own risk
What are your favorite resources for managing in a difficult economy?
Photo credit to lusi at http://www.sxc.hu/browse.phtml?f=download&id=1176252