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SMB Recession
Question: How can banks help small businesses cope with the challenges posed by a recession?
Answer: In every looming challenge an opportunity is waiting to be born. The current recession is a big challenge confronting many sectors of the economy. Banking and small businesses make up such a large percentage of the US economy and share much more than a relationship based on credits and debits. Both are directly impacted by the recessionary pressures building in the economy. Banks can show thought leadership and facilitate recovery by working with small businesses to manage recessionary risks and to continue to encourage and fund entrepreneurial initiative based on sound risk assessment considerations.
Small businesses' acute exposure to macroeconomic risk factors can be tempered by working closely with an involved banker. Risk transfer strategies that address inflation in basic commodities, foreign exchange exposures and energy prices are immediate opportunities for banks to provide transaction services based on sound value added advisory services.
Small businesses with large exposures to real estate or public equity markets also represent a great opportunity for bankers. Some may need to leverage these assets while another may need to deleverage its balance sheet to meet the goals of its business plan. By matching the goals and objectives of the recession business plan with funding strategies, bankers can suggest financing alternatives that add value to a new value chain.
During a recession, many businesses will be presented with opportunities to expand and grow. Competitive factors will ebb and recede and the banker and businessmen must be ready to step in with capital and other portfolio assets to help entrepreneurs realize growth. Bankers are connected people and must leverage that portfolio to connect people, incubate businesses and grow profits within an expanding value delivery chain.
Recessions drastically alter market dynamics and bankers need to be extra vigilant. They must understand how the myriad economic currents and recessionary undertows uniquely affect each one of their customers and pilot them to the safe haven of profitability and growth.
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First published on BankersOnline.com 4/21/08
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