I’m not the first to write on this topic, and I certainly won’t be the last. But it is top-of-mind right now, and I simply have to weigh in: What can new business owners do to stay alive in this crazy, credit-strangled economy? There are two parts to this, and I’m intentionally using the word “debt” instead of “credit” here, so there’s no confusion:
Your debt line – Hopefully, whatever debt you took on to start your business is still in place.
** If you financed your startup with a home equity line of credit, however, your credit limit may have been lowered dramatically because of changes in the value of your home. It can’t hurt to talk with your lender, but keep your expectations realistic.
** If, before credit markets tanked, you were preparing to go out for additional funding, you may want to revise your approach. Scott Shane at Small Business Trends recommends talking to a banker at a community bank. These banks seem to be less affected than the big banks. If your business is very new and you can’t show revenue, you might also try peer-to-peer lending, also recommended by Shane.
Repaying debt – Spending is constrained right now in most markets and industries, so your cash flow will probably be affected, at least for a while. You’ll need to find other sources of funds to keep current on your obligations.
** Eliminate all unnecessary expenditures for the time being. I know, it means you’re adding to the slowdown if you don’t spend, but you need to do what you can right now.
** Raise money by selling assets that are not essential to keeping your business going. Shane suggests selling a business vehicle and leasing it back.
Whatever you do, maintain your good credit record. If it means talking to your debtors about restructuring your obligations, give it a try. If you stay afloat, you’ll be stronger when the economy turns around — and it will, in time.