SCL Offers Perspective as Coronavirus Continues to Disrupt Business Operations
The federal government has lowered interest rates, national sport leagues have suspended games, travel from Europe to the United States has halted, and businesses nationwide are trying to calm customers as fears surrounding the global spread of coronavirus (covid-19) build.
In the past several weeks, since the virus that originated in Wuhan, China has spread globally and infected thousands, the stock market has gyrated. In perhaps the most significant move by the federal government to encourage investors, the Federal Open Market Committee recently slashed rates to the lowest they have been since 2008. With the deceleration of a National Emergency, funds become available to state and local governments.
In addition to cushioning the blow for businesses, many of whom are dealing with decreased customer turnout, lower interest rates could pose some opportunity in our industry.
“This may be an uncertain time, but it’s also the best time to assess and take some measures that could positively impact your long-term growth,” said SCL General Manager Travis Becktel. “Taking advantage of lower rates now can create success later on. We want all of our customers to recognize this as an opportunity to grow while still acknowledging that it is a significant obstacle.”
As ITR Economics puts it, “it is more important than ever to base decisions on empirical data rather than emotional response.”
Refinance Your Loans and Seek Lines of Credit
With rates the lowest they’ve been in over a decade (1% to 1.25%), it may be an opportune time to refinance business loans. This could mean lower monthly payments in the short term, which can free up additional working capital in your budget.
According to U.S. News & World Report, refinancing business loans can be a bit more restrictive than refinancing mortgage loans but is typically available for:
• Term loans
• Working capital loans
• Equipment loans
• Commercial real estate loans
• Business lines of credit
Increase Your Marketing Efforts
For many of our partners, lower interest rates are also a benefit that should be communicated to customers. This means boosting marketing efforts directly through channels like email and direct mail or indirectly through social media public relations efforts.
For our automotive partners, this is especially imperative considering the negative impact coronavirus has already had on parts inventory and buyers on the lot. Stacey Miller, senior director of communications for the Auto Care Association, a trade group representing 150,000 auto aftermarket and service businesses, told NBC News “by mid-March, the shortage of supplies will be felt and members are projecting they’ll experience disruption through May or June” even if operations in China soon get back to normal.
While decreases in revenue from parts departments and body shops should be expected, one strategy could be to focus efforts on front-of-lot sales through increased marketing.
Consider Capital Improvements
Although there is some uncertainty with regard to first quarter (and possibly second quarter) profits, if you have had capital improvements on the docket, this may be an ideal time to start implementing those plans.
Lower interest rates on loans and lines of credit could mean getting new equipment or expanding your business for a lower overall cost than you initially projected.
“While things seem uncertain right now, historically, markets tend to recover in the long term,” Becktel said. “If you take advantage of lower rates now, your business could be in a better position when that recovery occurs.”
If there is a recession or damage to the overall economy, some companies may need to sell assets to stay afloat and others may be forced to close their doors. Keeping cash on hand or having the ability to access capital through business loans will help you react to opportunities to obtain machinery at discounted rates. If your competitors need to size down their fleet, acquisitions could become part of your strategy.
Assess Your Inventory
When it comes to inventory, it’s probably wise to assume the products you’ve had access to on a regular basis may not be available in the coming months for a variety of supply chain related reasons. Do not assume anything. Instead, SCL recommends keeping your fuel tanks full and to begin taking inventory of what products you have on hand that could be affected.
This could mean replacing products currently on your shelves with others that don’t come from China, or investing in products with multiple applications, reducing the need for so many product types.
The goal, as always, is to have what you (and your customers) need in stock, which may merit introducing new products.
Monitor Government Action
It’s always a good idea to keep tabs on any reactions from the federal government, especially in a volatile economic environment. Most recently, President Trump announced on Friday, March 13 he has instructed the Small Business Association to provide low-interest loans to small business affected by the coronavirus outbreak.
The loans, which are only available for small businesses that can’t secure loans elsewhere, are designed to help “meet payroll; stay liquid during drops in customer demand or delayed payments; and look for alternatives or manage supply chain issues,” according to Workest.
The SBA’s established Economic Injury Disaster Loan (EIDL) program will provide working capital loans up to $2 million for economic support and help overcome temporary revenue loss during the outbreak.
For more about qualifications and if you apply, contact the SBA.
“The bottom line is that although we encourage our partners to take the necessary precautions to face this crisis, it’s still possible to keep their businesses moving forward,” Becktel said. “Our experts can help partners in any industry sector make decisions and employ strategies that keep growth on the front burner.”
Contact an SCL Consultant today
In a wide range of automotive, industrial and commercial sectors, SCL remains steadfast on its commitment to product and industry knowledge, performance satisfaction and superior logistics. We protect and optimize the machines that keep our country moving. For more information on how we help can help with services including bulk purchasing or managing inventory, contact an SCL expert today.