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How to survive a downturn? Show me the money…

Magnifying glassIf your personal income is based on your volume of loans closed, you may be feeling the pinch about now. Running low on personal cashflow

  • adds to the stress of a down market or credit crunch.
  • reduces your ability to make decisions that will bring you through the downturn.
  • adds a feeling of desperation that comes through to your prospects.

Here are some things I do to manage the outgo side. These ideas might help you personally and might give you some insight as to what your small business borrowers can do to weather the storm in turbulent times.

  • I put 10% of every business revenue check into a ‘business’ savings account.
    • When times are flush, this builds up a reserve fund.
    • When times are tough, I may need to take some of it back out, even all of it, even more than all of it. But the ‘more than’ is there because I started in the good months.
  • I figured out what the annual total of the non-monthly business bills are and save 1/12th of that amount every month.
    • Estimated taxes if you are not paid wages
    • Dues
    • Continuing Education
    • Equipment purchases
    • Twice a year promotional mailing
  • I reworked my family budget to live on 85% of what we take home.
    • If that seems too hard, start with 95%.
    • Look at everything you spend money on:
      • Cable TV
      • Eating out
      • Clothes, hair, nails, pedicures
      • Vacations
    • If you have kids, ask for their help.
      • Reduce allowance temporarily
      • If they have a job, ask them to take over some of their own expenses for a while
      • Ask for their ideas of a family vacation at low/no cost.
      • Kids really like to help and this teaches them responsibility when they are grown and run into their own budget crunch.
    • By having a plan ahead of time (or in use now) you can cut back quickly when need be.
  • I figured out the annual total of the non-monthly personal bills and save 1/12th of that every month.
    • insurance (life, auto, disability)
    • propane
    • medical/dental
  • I looked at my business operating expenses and prioritized in case of a low cash month.
    • Keep the ones on the list that are critical to your pipeline building activities.
  • I built up a personal reserve savings of 3 months take-home and a business reserve of 3 months operating expenses.
    • If that seems pie-in-the-sky, try for 1 month and build up.
    • Clearly, taking these steps when times are flush is easier than when times are lean.

When you are not frantic about paying your bills, you can stay focused on business-building strategies. You can continue the expenditures (time and money) that will help you survive, and succeed, in a down market.

I have been in the training business since 1979 and focused on loan officer training since 1989. I have seen ups and downs and ups and downs and….

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.