Recession Proof Your Business

By 08.31.22November 21st, 2022No Comments
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The Bank of England has raised interest rates again by 0.5% to 1.75% as the UK battles to prevent inflation running out of control.  It’s the latest in a series of increases but it was their forecast that the UK would enter a recession in the latter part of this year and remain in that state for over 12 months that has caused an increased level of concern amongst businesses.

If their forecast comes true, then businesses will need to prepare for it and implement measures to mitigate the impact that a recession will have.  eCapital have identified 5 measures that owners should consider to prepare their businesses for any likely Impact.

Secure the funding you need early

Experience tells us that funders appetites tighten during an economic downturn so don’t wait until a recession is in full flow to seek a funding solution.  Explore the options now and get a facility in place that would support and protect your business cashflow. Putting a flexible funding solution in place could be the single most important factor to help keep businesses trading.

Invoice finance is a flexible form of finance which boosts business cashflow by providing up to 85% of the value of unpaid invoices as they are raised.

Talk to your suppliers

Most businesses will be impacted by a recession so to protect your own business, you need to understand how your suppliers are faring to help you gauge the impact on your business should they be struggling and to seek alternative supply options as needed.  It will help you identify potential pitfalls before they happen. 

Reconsider big investments

Investing in your business is critical for growth – be it purchasing vital equipment or moving to new premises.  However, in uncertain and recessionary times, business owners need to ensure that any investment is well placed.  Is it needed to keep business trading, or will it produce a good return? It would be unwise to commit to large repayments when income may be unpredictable causing cashflow issues.

Build an agile workforce.

It’s important that you consider the best approach to staffing.  There is always a tendency to cut down on employees if your business is losing revenue because of a recession.  However, losing employees can leave a wake of damage effecting the livelihood of the people let go, disrupting the business or even damaging your culture and brand reputation.  To prepare for a future recession, you could begin to think about resource allocation and consider contractors and freelancers, so that your business can pivot and quickly react when needed.  You could also train people to handle other roles if needed.

Protect your Cash Flow

Cashflow is king!  In difficult trading conditions, it is critical that you protect your cash flow ensuring you have the cash available to meet your financial commitments.  It can be difficult as revenues dip and profit margins tighten, making it increasingly difficult to maintain a healthy supply of working capital. Consider therefore, cutting back on non-essential spending or find out if you can buy them cheaper from a different supplier. You could also explore using an invoice finance facility with built in bad debt protection to give you peace of mind in the event of a customer insolvency.

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eCapital Commercial Finance (eCapital) is a leading invoice financier providing funding facilities up to £3m to support the growth of SMEs through the provision of flexible working capital facilities. The business has grown significantly since its launch in 2001, providing over £4 billion of funding to businesses. It is majority owned by eCapital, a US based financial services business with interests in the USA and Canada.

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