Businesses are facing a double whammy at the moment – a slowing economic cycle together with a global credit crisis. A lack of confidence in the market – brought on by events such as the investment bank collapses – has stopped banks lending between themselves and capital markets. All organisations, including contractors, are facing not just a scarcity of funds, but a rising cost of capital as well.

The silver lining for contractors is the federal government's stimulus package which, once it takes hold, could mean real opportunities for organisations in terms of infrastructure projects. So, what measures can contractors take to give them a better chance of securing finance during these times while ensuring they keep an eye on the future?

Firstly, make sure you understand your debt levels. This includes knowing exactly what type of debt you have, when it rolls over and whether those funds are going to be available on an ongoing basis. With limited capital in the market, companies need to be aware of how much is available to them and what they can potentially access at any given time. Without this knowledge, companies won't be prepared with the right resources and equipment when new project opportunities present themselves.

Secondly, start talking to your financier. A contractor's relationship with its financier should be close at any time but particularly so during challenging times. Only by staying in constant contact with a financier can an organisation gain any concept of what funding is available to them. If a contractor is tendering for new contracts, they need to know whether funding is going to be available to them to meet their capital expenditure needs.

A close working relationship between a contractor and its financier means the financier fully understands its customer's business and can better determine what sort of funding is required. For instance, it may be that a contractor starts using different financiers for the different types of finance.

With today's capital constraints, it may make more sense to have a number of suppliers for, say, an ordinary bank facility, property finance and equipment finance, instead of bundling it all into one. Only by maintaining this familiarity with your financier can you really know what will work best for your business – now and into the future.
 
Lastly, become more granular in your approach to business and financial management. If you haven't already, it's time to get into a rhythm of monthly reporting to ensure you have an in-depth understanding of your business at all times. Gone are the days of producing a set of financials once a year; companies must be able to provide reports on the current state of their balance sheet, their profit and loss and their cash flow at all times.

Watch your debtors, too. Understanding how you are paid by your debtors, what they owe you and when you can expect to be paid all contribute to knowledge of your own financials. Without this, you are not giving yourself the best chance of attracting and securing the right finance.

At times like this, it's prudent to analyse exactly what your financial situation is, how you can ride out the tough times and what your financier can (and should) do for you.

Ultimately, it's about keeping your eye on the future and adjusting to change to better arm yourself when seeking funds. By ensuring your house is in order, so to speak, and structured to suit this new business environment, you are in the strongest position possible to ride out the downturn and position yourself for future opportunities.

In other words, take front foot action with strong back foot control of the business. - Neil McKay