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Operating a Business in Times of Uncertainty                              (or Pass the Pepto, It’s an Election Year)

9/20/2016

2 Comments

 
​It’s another election year, and I am still not sure my stomach has settle down from the last time we went through this. More months of uncertainty.  More months of waiting 
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​Uncertainty and risk are different.  Heck, I can handle risk.  Risk, when properly analyzed, can be mitigated.  Insurance is risk mitigation.  Every business operates with a sense of risk management in their day-to-day operations.  Much of the risk that business owners routinely face has historical data that allows them to manage risk in a cool, calculated, steal-eyed manner.  Just like the gunfighters from the old west.  They sized up the situation, recognized the risk and….BANG! Situation managed, risk mitigated….(which usually meant taking down 15 bad guys with a six-shooter, without reloading…. AAARGH!) (Also, how cool of an action movie tagline would that be?  BAM, RISK MITIGATED).  Ummmm, digressing again I suppose.  Sorry.
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​Uncertainty deals with possible outcomes that are unknown and nearly impossible to quantify.  There is an old saying; “You don’t know what you don’t know.”  This old adage fits so perfectly into the current political climate.
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Well said, Mr. President, well said.

Roughly one-third of 715 small-business owners surveyed in June 2016 by The Wall Street Journal and Vistage Worldwide Inc. said that uncertainty related to the November presidential election is having a negative impact on their business. Firms have reported delaying hiring, putting off investments or reducing new equipment orders.
The article also quotes Brandon Julio, an assistant professor of finance at the University of Oregon Lundquist College of Business. He states, “Small businesses are more likely to be skittish because they face a higher cost of capital than larger firms and often have more trouble recovering from mistakes.”  Prof. Julio also said that this election “will have a higher degree of uncertainty than those we have seen in the past” because of the sharp differences between Hillary Clinton and Donald Trump, and ongoing questions about what their economic platforms will look like.

We have certainly noticed this at Enterprise Development.  Our loan volume is down and it appears that businesses are a little nervous about the outcome of the election.  I am nervous as well, but I still believe that whatever the result, the next day the economy will continue on the same path it has been.  I cannot imagine a massive collapse if either candidate is elected and, if you ever read any of my other blogs, you know that I love crazy conspiracy theories as much as the next guy (for example, please read my blog “The 504 and the Tin Foil Hat Postulate.”).  

I seems to me, from a commercial lender’s perspective, this is a great time to buy a building.  Think about it, interest rates are crazy low, the economy, though sluggish, is no different than it has been for the past number of years.  Finally, principle and interest payments are usually cheaper than renting, and the owner has a tangible asset rather than just flushing rent money month after month.  If a business’ competitors are holding back, this might be the perfect time to double down, get a 504 loan and expand.  
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