What’s the first step that a business should take following a financial blip?
The first step is often easier said than done – keep calm and don’t panic. A cool head will always make a better decision than a panicked mind.
Be quick off the mark to react, but be sure that you fully understand the issue that caused the blip and how it arose, then formulate a plan to resolve it. However, if you don’t know how to sort it out then seek help and advice. SMEs should never think they need to keep problems to themselves and we always encourage businesses to reach out for our support.
Depending on the situation, the next step is to advise any stakeholders, for example key suppliers or funders. Keeping them in the loop, informed and updated as this will increase the chances of securing their ongoing support through the recovery process. If you keep them in the dark you risk alienating them and what started as a blip might spiral into something bigger.
What’s your biggest piece of advice for an SME recovering from a tricky financial situation?
Whatever the situation, whether it’s a customer that’s not paid or you’ve fallen behind in payments to suppliers, my biggest piece of advice to an SME is to keep focused on the path to recovery.
Put all your effort into turning things around. Remember that financial recovery is a long process, so it’s important not to become complacent mid-recovery as this could result in the business finding themselves with same issue they had to start with.
Additionally, you can only learn from the experience. Take the time to understand what went wrong and ensure that systems, processes or activities are enhanced so that you limit the chance of it happening again.
How can a funding partner help an SME who has had a bad financial experience?
Before putting any wheels into motion following a blip, a good funding partner will make sure that they understand a businesses’ background, current position and key focus moving on. At Ashley, we use this insight to make sure that we’re well placed to work alongside and support all our clients, and take the time to properly understand the funding needs necessary to get them back on track.
Communication and relationships are key, and a funder will make sure this only builds as time goes on. There should be a high level of trust between a funder and client when it comes to disclosing information about a bad financial experience, no matter if the relationship is new one or well-established. We’ll work with our clients to identify what went wrong, how they can best avoid it happening again and how we can support them going forward, which should hopefully give the SME some comfort.
How can a SME tell which funding partner is right for them?
In simple terms, it’s up to the SME to decide on who they think they can work best with to deliver the right solution for their needs. In order to find the best partner, you have to be clear on what the key features or benefits you’re looking for in a funder.
For example, it could be speed of response, flexibility, cost, relationship or whether you want a tailor-made or off the shelf product or facility. It’s important to do your research, only that way will you be able to tell you’ve chosen the right partner to help you. At Ashley, we cater to individual circumstance and help turn around all kinds of SMEs by saying ‘yes’.
What are the customer cases in which a business has encountered an issue and turned it around, that you been most proud of?
We have a large engineering firm in our portfolio who, following the downturn in the oil and gas industry, saw their turnover drop by over 30 per cent month on month, with mounting losses being incurred.
Quick to react, the MD contacted us to fully inform us of the situation and the strategy they were implementing to resolve the issue. The business downsized, cut costs and with additional funding support from ourselves (which we were happy to provide, being fully aware of the situation) they managed to steady the business and get it back into profit.
Today, the business is trading well. Had the MD not reacted as quickly and come to us for help, the business would no doubt have struggled and potentially failed.
Why do you think SMEs can be reluctant to seek help after a blip?
I think the main reason is pride, and potentially denial. Most SME owners simply don’t want other companies to know that they have slipped up financially or if something bad has happened. There’s often a fear that if their competitors find out, it may be used against them. Additionally, they don’t want to lose face with their peers and colleagues.
However, sometimes they just don’t have a decent support network of contacts that they can confide in for help. Many SMEs don’t even know that the help they need is out there.
Here at Ashley, we like to remind SMEs that financial blips are more common than you think and it’s nothing to be ashamed of. We know first-hand that every business will have to work through some teething and challenging problems as they grow, but we also know that the recovery process can be made a whole lot easier with the right support. Working with a lender that is both fast and flexible can equal a problem solved.
Richard Waldman is group sales director of Ashley Finance