I usually do a prediction post early in the year, and indeed, that’ll be coming. But I realized I never really do a New Year’s Resolutions post. Maybe that’s because I generally don’t make them – I don’t feel the magic turning of the calendar means a “new you” or whatnot.
But there is a change in the air – I’m seeing companies look harder than ever at financial flexibility, and remaining as nimble as possible. You could even say they are resolving to do so. Let’s discuss that a bit.
The pandemic has shown us how fragile it all is, and how everything can change on a news headline or two. Companies can no longer afford to have their assets needlessly tied up. Staying liquid and “ready for anything” is very desirable.
So what does that mean for small and mid-sized companies? It means businesses who finance equipment are going to increasingly look to shed lending restrictions, like blanket liens, minimum bank balances, and requalifying for a loan every year. We go over these extensively here.
If you borrow money from a bank, and thus have a blanket lien and a minimum balance they insist you keep, you are FAR from financially flexible. If there’s an event tomorrow that affects your industry, your cash and your assets are tied up. In plain terms, you can’t make a financial move.
The other really popular bank restriction is making you requalify for the loan every year. Well, how many industries do you think were a bit off in 2020? So for many of those companies, not only did they have an off year, but the bank has every right to say “yea, you know that equipment loan we gave you two years ago? Well, your current numbers say you wouldn’t get it today, so we’re calling it all in right now.” Ouch.
Financial flexibility folks, that’s where it’s at. Choose an equipment lender who does NOT use these restrictions (hint hint – us!)
Happy New Year everyone. Stay safe, stay healthy, and stay flexible!