The following article was written by Robert J. Hicks and published in the Indianapolis Star on October 28, 2008.

Businesses Can Weather Economic Storm

As a result of a global economic downturn, frozen credit markets, devaluations of assets, and consumer fear, these are challenging times for businesses.  In an effort to restore credit markets, the US Government has undertaken a variety of activities including: (1) bailouts of Freddie Mac, Fannie Mae, and AIG, (2) passage of the Emergency Economic Stabilization Act (EESA) and the creation of the Troubled Asset Recovery Program (TARP), (3) creation of a commercial paper facility to purchase 3 month commercial paper, (4) investment of $125 Billion in nine large US banks (with $125 Billion of direct investment to follow for other banks), (5) increase from $100,000 to $250,000 in the insured deposit limit for FDIC and credit unions until December 31, 2009; (6) FDIC deposit guarantee for non-interest bearing accounts through December 31, 2009 and bank senior debt through June 30, 2009; and (7) this week's announced backstop for money market funds. 

Will this preliminary bailout plan work?  What should businesses do while waiting for this to work?
  
Improving the financial health of banks, providing a fluid commercial paper market, and backstopping money market funds are intended to inject liquidity into the economy and fuel business and consumer spending.  While market reaction has been slow and erratic, the 3 month LIBOR has dropped about 100 basis points from its recent highs - providing some hope that the credit iceberg may start to melt.

While each business has its own unique challenges, here are tips to consider in navigating these difficult times:

• Focus on two fundamental goals - short term survival and long-term success.  One without the other is pointless.

• Be positive but realistic. Don't panic or apologize about changes.  No businesses are immune to a downturn.

• Cut discretionary expenditures which don't enhance profitable revenues.  Balance the costs and benefits.

• Don't cut key personnel or abandon core values.  They are essential to long term success.

• Re-prioritize to pursue immediately profitable opportunities.  Possibly delay others.

• Pursue backup liquidity sources. Don't wait for the emergency.

• Communicate regularly and honestly with lenders.  Even if loans are not in default, internal issues could cause banks to terminate at the end of term.  Bad news early is better than bad news late.

• Restructure credit lines for maximum availability.  Consider trading increased short term borrowing costs for more availability, lower prepayment penalties and a pricing reset when situation improves.

• Consider enhancing capital position through financial or strategic partner (even if the valuation seems lower than desired).

• Evaluate joint ventures and strategic relationships which strengthen financial position and business opportunities.

• Manage receivables. Catching issues early helps avoid becoming a friendly lender to customers.

• If in a strong financial position, consider pursuing acquisitions. Warren Buffett didn't invest in Goldman and GE at the peak of the market. 

The bottom line is that adversity creates opportunity.  This is not a time to be negative or complacent.  When navigating this climate, the right blend of calm optimism, realistic assessments, and proactive decision-making will help weather the storm and can strengthen your business on the other side.