Portfolio Management During a Rising Interest Rate and Inflation Environment
One of the effects of a rising interest rate and inflationary environment on companies is a strain on cash flow. Borrowing costs increase, influencing profitability and debt servicing abilities. It’s important, therefore, that lenders are in tune with their clients, assess if their P&Ls are suffering and if so, what their clients are doing to deal with it.
In our business, we continually monitor portfolio performance and over the past few months, we’ve seen a significant rise in cash flow issues; specifically, a lack of control in managing cash. Sometimes cash isn’t coming in the way our borrowers think it will, leading to bounced checks and the ensuing consequences. We look to see if clients are performing thirteen-week cash flow projections or just managing by the seat of their pants. For most, they do not do projections so requests for over-advances have risen significantly.
Overall, these negative client trends are a result of the impact of rising interest rates and inflation. Keeping an eye on credit quality and conducting credit assessments to identify potential vulnerabilities in your portfolio can help you stay ahead of any problems.
About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.
As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.
If you know of, or are, a business in need of non-traditional financing, contact Mark Hafner at 800.742.0733 or mhafner@celticcapital.com, or visit us at www.celticcapital.com.