How to Protect Your Business and Credit Score During a Global Crisis
It is no longer news, how the Covid-19 pandemic has ravaged the world, destroying lives and businesses. The devastation is so great that many experts in the science, business and finance, and the government, have predicted that it could take several years or more to recover.
As a business owner, you’re most likely have felt the impact as soon as the UK government began to enforce the lockdown to prevent the spread of the virus. And not only did the lockdown confine people in their homes, businesses also had to shut down, which means little to no cash flow. Even as of today with the relaxation of lockdown, businesses are still faced with the challenge of getting back on track with their financial obligations like bills and wages. This is indeed a stressful time to be a business owner. There will be a lot of anxiety relating to the loss of business, unemployment, financial sustainability and debt.
Not only will your business take a hit, your personal credit scores can be affected, especially if you cannot pay outstanding repayments due to a lack of cash flow.
To safeguard your business and personal finances moving forward, follow this guide to protect yourself if this happens again.
Monitor your bank accounts for suspicious activities
A global crisis such as the Covid-19 pandemic always presents an opportunity for fraudsters to strike. If you follow the news closely, you may have come across a few stories related to financial crimes, such as scams and other types of fraud during this time.
Several security reports have highlighted common scams that people are likely to fall into during a crisis. Such as – mail scams, fraudulent website links, malicious file attachments, and a variety of others designed to trick unsuspecting victims to give up their personal data. On many occasions, these scams use fraudulent financial aid websites or charities. Ensure that you scrutinise any suspicious emails, social media posts with links, phone calls, or text messages.
If you must apply for government financial aid or with any type of charity, go directly to the official government website to get accurate details about your loan options. Also, apply the same level of scrutiny to any charity organisation you might want to help.
Review your bills
If you are probably struggling with cash flow, the chances are that you’ll have issues paying most your bills. The first thing to do is to list your bills, and then develop a plan for paying them. Now, you may want to prioritise since you may not be able to pay them all at once. Review your bills and eliminate the ones that aren’t important to reduce cost. Then use the money you have for important expenses like rent or mortgage, leases, credit card debts, short term loans and utilities.
There are apps with automated features that can help you make the process easier. Many of these apps have features that can help you monitor your money, as well as integrate with your credit cards, loan lenders and more. With these apps, you will be able to monitor all transactions and account for your spending. But most importantly, you will be able to identify bills or spending that can be cut down.
Use a credit security service
In a time of crisis, you need to increase the level of security, especially when it concerns money and identity. A service that monitors your credit and identity is your best bet against fraudulent activities that can dent to your credit score. This is one of your best lines of safety in the digital age when we are more prone to internet fraud.
Some services will help you monitor your credit and alert you when there is a data breach. Also, they will prevent third party access to your data, therefore reducing your exposure to identity theft.
Contact your creditors if you are struggling with repayment
During a lockdown, making money is difficult unless you run an essential business that people need or will use even while in isolation. If you find out that you can’t pay your next loan instalments, contact your lender before it is due. Do not wait till you have defaulted on your payments, as this could damage your credit score and even place you into the bad credit category.
Contacting your creditors and letting them know your current situation could assist in keeping your credit score intact. Being in lockdown is already a good enough excuse as everyone is in the same boat. So, lenders have to take this into consideration but will only help you if you reach out to them. Many creditors will most likely be willing to look at ways to work out a plan for your repayments.
If there is the option for a deferred payment plan, take advantage of it. However, ensure that you have a clear understanding of the terms and conditions before doing so. Knowing what you are committing to is important, which could involve a longer loan duration. Dependent on the type of credit you have, there could be larger repayments involved over a specific time and higher interest for the rest your credit/loan term.
Reduce your spending to conserve cash flow
As obvious as it sounds, the last thing you want to do during a crisis is increasing your spending. Most people will fall for this as they now have more time to browse the internet and stumble on things to buy however unnecessary they might be. Even if the government decides to give us financial aid again, or help with electricity bills etc. that free up some funds in your pocket, try to resist the urge to spend more.
There is no better time to be conservative with your spending than in a time of crisis, as no one knows how long it can actually go on for. So, if you can squirrel away some sort of emergency funds you’ll be well equipped to meet your loan obligations when your cash flow is short.
Furthermore, by doing the above you’ll stay clear of a low credit score and maintain a good one!