Options for a business that finds itself behind in business loan repayments

30 May

Written By Kelly O

Times are tough. Credit reporting agency Centrix is already seeing numbers of consumer accounts in arrears climbing and companies defaulting on their loans increasing. Economists are predicting the Reserve Bank of New Zealand (RBNZ) will need to raise the Official Cash Rate (OCR) higher than the forecasted peak of 5.5%. A RBNZ survey of 1,000 New Zealand householders has found they expect inflation to be higher in a year than it is now. The unemployment rate is at a near-record low of 3.4%, making finding staff difficult. It’s not surprising that some businesses are struggling.

Katrina Shanks writes of options businesses can look at if they find themselves in financial difficulties.

• Talk to a risk manager at the bank about your options as soon as possible. They may include interest-only payments or reduced payments over a longer period. You’ll need a business plan to show how you plan to trade yourself out of the difficulty.

• Lower inventory levels so less money is tied up in goods.

• Increase margins – you’ll need to trade off the risk of losing customers who may shop elsewhere if prices increase.

• Reduce credit for slow paying customers

• Deal with fewer suppliers and negotiate better terms with those you keep.

• Request longer credit terms with your suppliers.

• Move to cheaper premises.

• Talk to a mentor to help with your stress.

• Seek professional help as to next steps if you can’t trade out of your financial position.

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