Digging into Deferrals, tips for businesses ending loan deferrals
By ATB Financial 1 October 2020
As a result of COVID-19, some Alberta businesses made the decision to defer their business term loan payments. Deferring loan payments offered businesses the chance to free-up short-term cash flow and focus on keeping their business afloat despite reduced revenues.
If you are an ATB business customer that participated in our Customer Relief Program, your deferral period may have already ended or will be ending soon. Here’s a few tips to help you manage business term loan deferral repayment.
Tip #1: Forecast your cash flow
Advice on how to forecast your cash flow when resuming regular loan payments and considerations you should make.
Chrisuala Pasco, a Relationship Manager with ATB, shares the following tips for forecasting your cash flow:
- Use a spreadsheet that is simple for you to adjust yourself
- Include a few months of "actuals"
- Utilize your existing balance sheet and income statement
- Update the forecast frequently
- Break down more complex line items
- Be conservative and realistic
"It is just as important to project future cash inflows as it will help identify shortfalls in advance and support business planning so that activities and resources are properly aligned," Chrisuala says.
Tip #2: Review your operating budget
Tips for reviewing your operating budget, including steps to take and questions to ask yourself.
Raj Bernier-Singh, Senior Manager of Entrepreneurship with ATB, provides advice on how to review your operating budget and questions to reflect on, such as: what are the business expenses? What does cash flow look like? And, what will next year and the year after that look like?
This exercise will identify the importance of having some funds tucked away for unexpected downfalls in the economy.
“Starting a savings plan is a great way to be prepared for the unexpected. By having a rainy day fund, it will be easier for you to weather the storm during challenging times” says Bernier-Singh.
Steps to follow when reviewing your operating budget:
- Make a sales budget
- Budget your costs
- Budget your operating expenses
- Account for unexpected expenses
- Adjust your budget
- Track your budget vs actuals
Tip #3: Update your business plan
Advice on how to maintain relevance and sustainability after your loan deferral period ends.
“The pandemic has certainly changed everything; our whole world has changed: the economy, our technology, consumer behaviors, and trends. Every single business has been impacted in one way or another. A business plan that was updated or created at the beginning of the year may already be irrelevant and outdated,” says Ashley Walker, Manager Entrepreneurship at ATB.
We recommend that business owners update their business plan regularly so that it is relevant and reflective of current factors impacting the industry. Business plans should be updated to demonstrate how your business has pivoted and adapted to change or pressures, how your business is sustainable long-term (even if another downfall was to occur), and how you have shifted in accordance with changing consumer behaviors.
Tip#4: Keep evolving your business
Look for business changes that can help you grow revenues and afford repayment.
COVID-19 has forced many Alberta businesses to pivot and re-evaluate their business model. Sandi MacGregor, Entrepreneur Strategist at ATB reviews changes you can make to evolve your business, including evaluating the Four Ps: product, place, price and promotion.
"The Four Ps are an old-school marketing term, but are a simple way to review all the key areas of your business and develop new strategies to increase your cash coming in," Sandi advises.