Articles
June 22 2011Corporate Finance
Author : J. Osteryoung
“Ask five economists and you'll get five different explanations—six if one went to Harvard.” ~Edgar R. Fiedler
Numerous signs indicate that the economy is starting to turn around. Will this happen any time soon? Probably not, but things are definitely starting to change. My best estimate is that we will see the economy really start to pick up in the second half of 2011. Even then, it will take a considerable amount of time to get unemployment in check. It will be a long while before the economy is able to absorb the vast numbers of workers who are currently unemployed.
Despite the fact that we have not really seen the economy making much progress, now is the time to start thinking about and preparing for recovery. If we do not start planning now for the next phase of the business cycle, we will miss a great opportunity.
One of the easiest things to consider is the real estate you will need now or in the near future. Commercial real estate prices are low right now, and interest rates are the lowest they have been in decades. Though we can not be absolutely sure when the commercial real estate market will hit the absolute bottom, there are great deals to be had right now. Financial institutions now have money to lend but have more requirements and larger down payments for commercial real estate, but this is an opportunity that is just too good to pass up.
Another thing to consider when preparing for recovery is refinancing your existing assets, everything from trucks to copiers. You might be able to obtain a lower rate, just by asking. If the holder of any of your loans is not willing to lower the rate, you can consider buying out the debt instrument and refinancing the asset with a new loan at a much lower rate.
Now is also a great time to consider a new inventory policy. When the economy starts to take off, raw materials and inventory are going to be in great demand. With so many fantastic prices out there, you may find that now is a good time to stock up on large quantities of inventory.
The last thing to consider is the infrastructure (people, assets and money) you will need when the economy starts to turn around. It is critical that the infrastructure is in place before your business starts to grow. If growth comes without the infrastructure necessary to support it, customer service will deteriorate.
Now go out and make sure that you have a plan in place that will enable you to capitalize on the coming economic recovery. This plan should include acquiring commercial real estate, refinancing existing loans and building the infrastructure you will need for the improved economy.
You can do this!