Liquidity in Turbulent Times

One area of concern you may have as a small to mid-sized business owner is seeking liquidity during turbulent times. Accessing capital can be a challenge for small and medium-size businesses in times of uncertainty. These companies form the backbone of our economy by employing local labor and investing in the communities where we live. When capital is constrained, many ask where do we turn? Before evaluating sources of capital, one must plan for the capital request by evaluating the essential cost of operations and the expected duration of the liquidity squeeze.

• Do you know which expenses can be “turned off” during an economic slowdown?
• Are there discretionary expenses that can be eliminated, future capital expenditures that can be pushed off, or variable expenses that will go to zero?
• What is the duration of the event, are there any gauges to monitor?

Answering the questions above will help understanding the projected losses, after expense reductions, and duration can assist with the credit request. Once you control what you have the ability to control, you can begin to look externally for funding sources.

• Capital sources, like bank loans or lines of credit, may be unavailable to new customers but likely represent a good source of liquidity if an existing line of credit is in place.
• Accounts receivable financing could be an option to raise cash.
• Non-bank lenders may have an appetite for a purchase order or inventory financing.
• Non-core assets could be sold to raise cash.
• Sale-leaseback transactions of company or related entity owned real estate could be considered as a measure of last resort.
• Off balance sheet or personal liquidity can be sources of short term cash infusions.

As you look at the questions and financing options above, we want to support you as you choose which options are best and identify the best plan for sustaining and growing your business.

We can help

Thinking through the decisions that need to be made around liquidity can be overwhelming. If you are wondering where to start, or what to do next, the experts at Elliott Davis can help.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.