The recent financial meltdown has really put the hurt on a lot of businesses. And it’s not just the Wall Street brokerages, the huge multinational insurers, and Big Three automakers that are suffering. In my hometown, restaurants that were vibrant a few months ago are now dark—their windows shuttered and doors locked—and stores and other businesses suddenly have “For Lease” signs posted out front. Credit is tight, banks are holding onto their money, and business loans are harder to get.
2008 is about to close out with a big thud—there’s not much we can now do about that. But what about 2009? Are the banks going to lighten up, or what?
According to Meredith Whitney—the Oppenheimer & Company analyst who in October 2007 correctly called Citigroup’s coming problems, along with Bank of America, Lehman Brothers, UBS, and others—businesses can expect plenty of turmoil in capital markets. In a recent Fortune.com feature, Meredith offered a bad-news, good-news prediction: “...I expect all these banks to be back in the market looking for more capital. We’ll also have a wholesale restructuring of our banking system, probably toward the end of 2009. There will be banks getting smaller, banks going away, and banks consolidating. At the same time, though, I think you’ll see more new banks created. We’ve already seen more applications.”
So, if you subscribe to Meredith’s point of view, things are going to get worse before they get better, but the industry is already building the foundation needed to recover and to once again open the cash tap. The key for now is to hang on—cut expenses wherever possible, defer purchases and avoid large capital acquisitions—while beating the bushes for new sources of revenue wherever you can find it. And do something special for your best clients and customers—be sure they know you value them and their business.
Cash is king, and it will be for the foreseeable future. Hang onto it. Even Meredith Whitney sees a silver lining out over the horizon, and you can take that to the bank.
