Banks and other lending institutions have taken serious hits over the past few months with more to come. Upcoming earnings reports will be bloody. Their capital ratios are not only threatened but are under siege.
As the securities they own are downgraded, they must increase their reserves, liquidate the offending securities, or cut back on other lending activities. Most banking institutions will probably do a combination of the above.
What does that mean for your clients? For many it means potential disaster. As credit gets tighter and tighter, the source for your clients to find funding for growth and operations gets tighter also. Many may well find themselves in a few short months locked out of the credit market even though they have sterling credit. For some that will mean they can't take advantage of new business opportunities; for others, it may be as drastic as closing the doors on their business.
Now would be a good time to find a quality business banker to team up with to begin talking to your clients about the direction of the economy and what they need to do now to insure their viability in the coming months.
If they have strong credit, now just might be a great time to acquire a line of credit while banks are still lending, assuring themselves of some credit in the coming months. If they need it, they have it. If they don't, they haven't risked anything to protect themselves.
This isn't the first credit crunch American business has faced and it won't be the last. But preparing for what looks like many months of tight-or even impossible to acquire-credit is not only prudent, but it could mean the difference between growth and stagnation-or worse.
Team up with a good, knowledgeable business banker from a rock solid banking institution and begin letting your clients know they have an alternative to sitting and waiting. Not all small companies are aware of how tight things might get. Many assume that they'll always have access to funds through their banking relationships. Helping them prepare for what appears will be a tough lending market will not only help you solidify our relationship, it just might help your client have the funds to purchase your products or services.
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