How the Mortgage Crisis Affects Small Businesses
by Larry Slusser on April 2nd, 2008
The mortgage crisis is having an effect far and wide across the economy and may even be affecting your company whether it is big or small. Many small businesses and even consumers that used home equities to fund their companies are finding it more difficult to obtain that type of funding.
This is particularly true in areas where home values have dropped. The level of equity in the home may be considerably less which changes the way banks view the loan. When they go to see their banker for more funding, they may not be greeted nearly as friendly as before, when all the mortgage problems started.
Unfortunately, some people even owe more on their property than it is worth. The banks have responded by tightening up their lending practices. When the banks start holding on to their money not wanting to make bad loans businesses and consumers start to feel the pinch as they have less money as well.
Businesses that are connected in any way to the real estate business, whether commercial or residential, are seeing spending starting to tighten up. When companies aren’t able to access cash as much as they were marketing budgets, freebies and other give aways tend to be some of the first things to get cut.
While it is a true statement that you need to spend money to make money you can only spend it when you have it or at least have access to it. The mortgage crisis has definitely affected many businesses ability to have access to cash.
So what can you do about the cash crunch? Get creative. If you have regular accounts that have to spend less, communicate pro actively about what’s going on. If you have to lower your prices in the short term to save the business, that would be a better alternative that totally losing the account.
Make sure the decisions you make are smart, you are probably not a social service and don’t need to finance your customers, however, it is the time to work with your clients. Good quality clients will remember how you worked with them in their time of difficulty and the loyalty you will gain will be tremendous. Plus, it’s the right thing to do as long as it doesn’t significantly impact the running of your business.
If you sell direct to the public now is the time for special offers, discounts, and sales on your most popular items. Be sure to advertise this is the lowest price in X number of years. One time only housing crunch special, or other clever advertising phrase. You certainly don’t want to be insensitive but you will need to let people know why now is the time to buy.
The mortgage crisis is an opportunity or an obstacle depending on how you view it. If you want to seize the chance to gain loyalty, improve your value to your customers, and improve your sales now is your opportunity.