Batten Down the Hatches

It’s a good idea to fine-tune your small business plan for any economic environment.

By Jake Hymes


In recognition of the more than 33 million small businesses in the U.S., we are sharing helpful best practices to fine tune your business plan to weather economic shifts. 

Responsibly manage your business debt

Interest rates changes have significant impacts on business lending. To effectively manage your debt, consider these financial tactics before applying for a business loan: 

Convert floating debt. Consider converting any floating-rate debt to fixed-rate debt, which flips the mindset from short-term financing to a longer-term solution. Although many borrowers use their investment portfolio as a natural hedge for floating-rate debt, it may still make sense to lock in a low, fixed-rate now for any variable-rate debt you may have.

Consolidate debt. If your company has extensive overhead costs with bills and outstanding balances, debt consolidation could be a smart strategy to move existing debt into one stream-lined payment. Debt consolidation can potentially provide a longer repayment period and/or lower interest rate—both of which can help improve available liquidity. 

Clean up your credit and tax liens. A tax lien is the government’s legal claim against your property when you fail to pay a tax debt. Make sure your credit and tax debt are up to date and tidy to ensure you’re getting the best rates available. 

Transition from alternative lending sources to conventional. If your business has alternative financing on the balance sheet, but you’ve been able to stabilize your profits and expenses, now may be the right time to convert your debt to more traditional loans and lending. 

Be honest with your banker. This may seem obvious, but you’d be surprised how many business owners inaccurately fill out loan applications, whether intentionally or inadvertently. Filing for bankruptcy or having a tax lien is not an automatic disqualifier in the application process. With that in mind, it’s better for your relationship with your banker to be transparent about details. 

Strategies to improve income

If cash flow is top of mind, take inventory of your equipment and see if there is anything old or outdated that can be sold, refinanced, or salvaged. Also, spend time reviewing your assets to determine how they can help the business work smarter and improve liquidity. 

If your business is inventory-based, assess your supply regularly and consider buying in bulk or shopping around to get the best purchase price. Another option is to restructure your pricing to align with the current market, inflation, and competitors. However, be wary of aggressive price increases to avoid upsetting your current customer base. 

Another way to improve cash flow is to streamline your accounts payable and accounts receivable processes. Review timing, steps, and ways to reduce your business bank account churn. 

Combat supply chain challenges

Small and large businesses alike are being impacted by supply chain disruptions like slow manufacturing and delayed shipping. As a result, we continue to see increases in shipping costs, storage expenses, delivery delays, and logistics issues.

To combat the supply chain challenges, consider ordering material further in advance than typical so you can more confidently predict what you need. This can impact upfront costs but can also help assuage concerns about products, parts, and shipping timing. 

Implement employee retention strategies

With unemployment in the U.S. at 3.5%, it’s important as a business owner to develop employee retention strategies to not only keep your employees but ensure they are happy in their roles. With nearly historical lows and despite some recent softening, the labor market remains competitive.

Here are some financial considerations in today’s labor market: 

• Invest in and strengthen your current team through talent development, wage reviews, internal promotions, and hires to help retain your current workforce. 

• Recognize that hiring costs have increased and plan accordingly. If raises and promotions are not in the financial plan, focus on benefits to make up for any difference in salary or hourly pay.

• Embrace the hybrid home-office schedule and provide flexible work environments. Consider how the work-from-home shift can help you cut costs if your industry allows for virtual or asynchronous work.

• Be shrewd in your resourcing forecasts, knowing you may not have the upper hand in resignations and new hire negotiations.

Running a small business requires an immense amount of discipline and perseverance, even in the best economic conditions. In today’s volatile environment, this is more important than ever. As a business owner, you must be willing to adapt to any changes that come your way and pivot to ensure your business is successful. Strategize and plan well by having a strong relationship with your banking partner, managing your debt, improving cash flow, finding alternative financing options, and focusing on employee retention.

About the author

Jake Hymes is senior vice president and director of small business at UMB Bank.

P | 303.839.2299
E | jacob.hymes@umb.com