There is an economic opinion that more companies fail coming out of a recession than during a recession. It is reasonable to presume the same may apply to a pandemic.
As Government support winds down and we return to our ‘new normal’ (I hate that soundbite) then there will be companies (and individuals) who will have the end of payment holidays along the end of CBILS and BBLS grace periods, resulting in a hit on cash flow.
As a former credit underwriter, the time to ask the borrower for anything was before they got their money, after that it was so much more difficult.
The same applies to defaulting.
Most borrowers know they are going to do it, very few actually act on that knowledge and get ahead of the problem.
With that in mind, here are three tips that will help.
I can’t stress this enough. If you are unsure or uncertain about making any credit payment then speak with the lender early, before you default or miss a payment.
This does two things. One, it clears your head and by taking action the worry and pressure it creates subsides. Two, by contacting the lender you have taken action, which is all that can be asked of you. By doing this you get the lender more on your side, and if it does all go horrible later on the fact you tried to resolve the problem early will work in your favour.
Rather than go to a lender and just tell them you can’t pay them, make a proposal. Be sensible, be considerate of the lender and be considerate to what is genuinely workable for you.
Instead of saying what you can’t do, say what you can do.
Remember, you are the one who knows best what you can genuinely afford. Take the initiative.
This is something that is all too common. If I was to go back and look at borrowers I have worked with in the past, then look at those with a lot of debt, the starting point is nearly always a need to pay one creditor which led to borrowing off another. And, the ever decreasing circle begins.
All that happens is when the credit supply runs out you have a far bigger problem with nothing new to show for it and far more to lose.
The bottom line is that none of us know what our ‘new normal’ is (I still dislike that soundbite) and it will take time to adapt to the post pandemic world.
By Dave Farmer