A recent Atlantic Monthly article discussed the inevitability of a recession at some point during the next few years. Although there are many different opinions among economists, pundits and politicians, there is certainly historical precedent for our new President to have to manage through an economic downturn at some point.

In a recession, small businesses will find it harder, perhaps even impossible to borrow money. As customers feel the credit crunch payments become less regular, and default occurs. As credit tightens, sales become harder to write.  You may find you are reluctant to offer credit terms to new, or even current customers.  Your reluctance could very well be good business acumen.  But, this is a recession.  Sales will slow.  This is a fact.  You want to keep your operation going?  You want to maintain your staff?  The only way to keep growing in a recession is to finance your sales – and that is where the real drama begins.

First, underwrite your customers before you give them credit. Imagine your bank loaning money to your business  without first making a determination of your ability to repay the loan. It would never happen. Think like a bank.

Second, you must put all credit customer terms in writing. A contract that outlines your payment terms and the actions you will take if terms are not covered. You will not be able to legally charge interest or recoup any potential costs if you do not get the customer to agree to them in writing beforehand. A personal guarantee https://unitedobligations.com/debt-collection-letter-gets-results/(business owner personally guarantees the debt if company goes out of business) will provide even more protection.

Third, have a plan in place to monitor your receivables and stick to it. Compose a well-worded collection letter (firm, but never angry). Get on the phone and speak with your customers and work out a repayment plan. Remember that if you can see a customer through a rough period, they may just become a loyal raving fan of your business. On the other hand, adjust credit levels when you need to, and in some cases, you will have to cut off credit until balance is paid.

Lastly, do not delay bringing in the experts. Hire a collection agency and work closely with them to get the best results.

You can grow your business in tough times, and you should. Just be smart about extending credit, and the rest will take care of itself.