Time to talk to other bankers

It is high time to get your business a Plan B. Here’s what to do…

I hope that you’re reading the financial papers and keeping up-to-date with what’s happening with the world economy. Don’t put your head in the sand. It will impact on Australia and it will impact on your business.

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Did you see Bush’s speech last week? Here’s a scary quote…

“The market is not functioning properly. There has been a widespread loss of confidence and major sectors of America’s financial system are at risk of shutting down.”

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Here’s what Obama and McCain had to say…

“…the effort to protect the American economy must not fail.”

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Are you getting the sense that no one is certain here?

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The US Government will put $US700 billion of taxpayers money to bale-out “the system”. And some commentators believe that more will be injected.

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I’ve just finished a book, by Joseph Stiglitz (he won the Nobel Memorial Prize for Economics in 2001). It’s about the REAL cost of the Iraq war. The US Government calculates the cost at about half that, $1.5 trillion. <

There is a salutary lesson!

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So I tend to agree with the pessimists. The cost will be more and both US taxpayers and the rest of us will be footing this bill in some form for many years to come.

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However, I also think that our banking system is more secure than that of the US. So I’m confident that the impact will be less severe in Australia. But it will certainly impact. It’s got to. When the biggest economy in the world is seriously ill, all of us are bound to get infected.

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Now, what can you do about it?

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Spread your risk. Start with your banking arrangements. It may be time to set up a relationship with another bank. As I said in my last blog, you need to make sure that you have access to funds. If you have only one banker and he/she decides not to approve that loan, then you may be heading for tough times.

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Start the relationship with a “small ask”. That might be a credit card with a low limit. Be absolutely religious about keeping your payments current and build up your credit worthiness. Put some cash into an account and transact. For example, pay some of your accounts through the new bank.

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I know that setting up another account makes life a bit more complicated and that it is a hassle dealing with two different accounts. But think of the alternative. How much of a hassle will it be if you can’t get the money you need to keep your business going? <

This problem will get worse before it gets better. If you think that there is any chance that you will need to get bank credit in the next year or so, then do something now. It will be good insurance – even if you don’t use it. You’ll sleep better at night knowing that you have a backup strategy.

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Till next week… <

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Gail Geronimos, is the founder of Achaeus, which helps entrepreneurs develop their businesses and she has just started a new site www.pitchingtoinvestors.com with tools and tips about how to develop killer presentations to raise capital.

To read more Gail Geronimos blogs, click here.

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Comments

Rob Findlay writes: Gail, interesting post, and the idea of switching is something I’ve also written about – I think most customers would prefer their banking with one institution, and would prefer that institution was a sound, trusted provider; flight to quality, etc. Banks must make it easier for customers to switch – this encourages new customers to join, and keeps the banks honest! I wonder if banks reward long term business, sadly it’s not often the case that a customer of 10 years or more is treated any differently to a customer of 10 weeks (“how come I get a $30 fee on a credit card when I have a $300,000 mortgage, $20,000 savings and have been with the bank for decades??”).