In our last newsletter, we talked about the fact that inflation had become “sticky”. The good news is that inflation seems to be falling in most countries. But that doesn’t mean that the liquidity squeeze is over.
Most central banks are entering a holding phase where interest rates will stay at their current level until they see more progress. Even with that, the forecasts are that there will be no interest rate reductions before 2024. What is adding to the problem is that banks are restricting lending overall while increasing their margins at the same time.
We were recently talking to a UK prospect who had just had their loan portfolio “reset” with a significantly higher interest rate. They were given a fait accompli and had to accept the new arrangement. Hence, they wanted to talk about how they could reduce their working capital requirements.
The good news is that we are more than ready to help companies like this that are not big enough to have any muscle with their lenders. Although the market pain continues, we have practical solutions to reduce the need for liquidity.
So who ya going to call? Us, please, not Ghostbusters.
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"One of the reasons why companies fail is that they prove unable to sustain the debt burden that has been placed on them. They need to do two important things pretty quickly. They need to increase their levels of profitability to the maximum, and they need to generate a lot of cash."