How to Protect Your Business From a Double Dip RecessionThe news around the economic world is there’s a chance we’re heading into a double dip recession. A string of disappointing U.S. economic data is pointing to it, although some say it would probably take a significant shock to knock the economy off course.
Whether it happens or not, it’s a good idea to prepare your business for a rainy day right now. The best way to do that?
Secure capital before an economic downturn. If a double dip recession occurs, it’ll be much harder to get the money you need to weather the storm.
“The process of commercial borrowing is best done in preparation for needing the capital, rather than when the request is made in a dire situation,” said Gary Honig, president of Creative Capital Associates.
“I would advise business owners who anticipate needing a loan in the next couple years (based on their goals and projections) to accelerate those plans and secure financing now,” said Levi King, president of Lendio.com
Banks have money and incentives to lend
With the Obama Administration desperate to turn the economy around, the SBA has flooded banks with money. Washington is continually looking to find better ways to loosen credit, and provide capital for small businesses.
“As far as total funds available, the floodgates are open” said Christopher Hill, personal banker of a Sandy, Utah branch of US Bank.
Getting a loan isn’t as easy as it was before the recession, but a double dip might make it doubly hard to secure that same financing. It will be easier to qualify for a small business loan now than it will be if the economy takes another big hit.
There are currently myriad business loan types and ways you can nab financing for your company. If you can’t get an SBA loan, you might be able to get a peer to peer loan, a cash advance, a business line of credit, or something else.
Why you should secure VC money now
We might be in the midst of a VC bubble. Thousands of angels are investing in companies these days like it’s 1999, and “seed funds are popping out like Oompa Loompas at the chocolate factory.”
Mark Suster, Partner of GRP Partners and blogger at Both Sides of the Table, said, “we’re in a bubble” during the 7th Founder Showcase event last week. He also said:
“Entrepreneurs need to get funding now so they can survive the cycle. In normal funding cycles, it can take 3-5 months to raise capital, but in this cycle it seems like that’s the number of days it takes.”
“When the hors d’oeuvres tray is passed, take two, and put a third in your pocket … You don’t know when it will be back around.”
“Go get yourself funded … In the last 3 cycles the companies that didn’t raise money were not the ones still around to tell the story.”
If it’s angel or VC money you’re looking for, do it now. Whenever there’s a bubble, it might burst at any time. If there’s a double dip recession, investors will hold on to their money and wait it out, as is portrayed below when investors shut down in 2009.
This infographic shows how following the recent abysmal economic dent on the industry, investment activity seemed to pick up considerably.
Is securing business capital now a good idea? How are you preparing your business for a potential double dip recession?