The following article includes excerpts of a conversation between Ravina Bains, VP of Canadian Business Banking & Wealth Management Sales Integration Interviews Jason Schneider, SVP & Head of Corporate and Commercial Credit. Both are members of The Scotiabank Women Initiative Advisory Board.
COVID-19 has had a strong impact on business across all sectors, creating a large amount of uncertainty for many business owners. We’ve explored our customers’ challenges and how they're managing and repositioning their business during COVID-19 or any adverse situation. Getting to know your banker, understanding your cash needs and asking for help are key to surviving any crisis.
What are your thoughts about the current environment, and what are we doing at Scotiabank to support our clients?
There are 3 phases of the pandemic from a business perspective:
- The first phase where effectively the economy shut down, a lot of businesses shut down as the government mandated
- Business was shut down and owners had to react to not having their business running.
- Moving forward into the reopening
We work very closely with our clients during these phases. We started off providing short-term deferrals, on both the retail and business side to give people time to adjust. Deferrals were in the forms of principal relief and covenant waivers. We also provided additional liquidity to help our customers through this challenging time.
What are the concerns from clients and business leaders during this time, and how have those businesses shifted their priorities during COVID-19?
The biggest issue is uncertainty. Generally, the starting point is to figure out your cash flows. How much cash you have access to? That can be cash on your balance sheet, cash from other means like access to credit lines, bank loans and funds. There are three phases where your business will consume capital or cash:
- When you're shutting down your business;
- Operating during the shutdown;
- And when you reopen, which could be in the form of working capital or rehiring people until the sales get up, running at lower capacity.
The more cash you have available, the longer the time that you have. Essentially, cash gives you time, and time allows you to create action plans. Have a good understanding of how much cash you have, how much you need and what's the shortfall. Once you understand that, then you can build your business and decide whether or not you can afford it. Understand your liquidity and how it’s going to play out over the next one, three, six-month period of time.
What are some of the proactive conversations that business owners should have with their bankers, not only during this time of volatility and uncertainty, but during other moments of market downturn?
1. Develop a relationship with your banker, if you haven’t already
Get to know your banker. You should invite your banker out to your business. Your banker should walk the floor. Your banker should get to know some of your staff. Once you develop that personal relationship, that banker will advocate for you and become your voice internally within the bank.
Developing a relationship with your banker provides you with options including the ability to get an answer much quicker for you to react on a business opportunity.
2. Develop a plan for reopening your business
3. Any other strategies or suggestions on what business leaders can do to maximize their financial position, and particularly support either their new business priorities or their shifted business priorities during this time?
Ask for help. If you develop a good relationship with your banker, you have resources across the entire bank, including financial planning, economics, or capital markets. There is likely somebody internally that can provide some additional insight, information or help. This is a long-term relationship. Scotiabank has almost 190 years helping our clients through up and down cycles. So, it's important for you to come and have open and honest discussions.
4. For those of our business leaders who find themselves in distress, they've got a number of creditors, they're running out of liquidity and cash, is there any advice that you would give them on what they should focus on or what they should do during that particularly difficult time?
Figure out who you owe, when it’s due, how much liquidity, and how you would go about building a plan. And hopefully in doing that work, you can actually quantify the plan and understand the depth of the challenge. After this exercise, visit your banker. You can start having a conversation about what your options are. Are there government assistance programs that you can tap into? Can you tap into the BBC EDC programs? What support can the bank give you? Work with your banker to come up with a sustainable plan that you can take to your creditors. Then together, you can work toward restructuring your business.