Cash: The Lifeline for Businesses in Economic Volatility
In today’s economically volatile environment, maintaining a strong cash position is more critical than ever for businesses. We are seeing changes that can impact businesses overnight, and working capital is the lifeblood that will keep it thriving during those times. It enables businesses to pivot quickly when their environment changes, which was evident during COVID-19. However, in periods of financial uncertainty, businesses often struggle to maintain sufficient liquidity.
According to the Australian Bureau of Statistics (ABS), during the COVID-19 pandemic, 41% of businesses reported having cash reserves covering less than three months of operations, with small and medium-sized enterprises being the most impacted. Xero’s “Money Matters” report revealed that 92% of Australian small businesses experienced at least one month of negative cash flow in 2021, and 20% experienced it for over six months. These figures demonstrate how quickly cash reserves can be depleted during economic disruptions.
So, how do you support businesses tenants during times like these?
How Commercial Lease Bonds Offer a Working Capital Advantage
A Commercial Lease Bond offers a powerful solution to this challenge by providing an alternative to traditional bank guarantees for lease security. Instead of requiring a business to deposit a large sum of cash locked away in a bank guarantee, a Commercial Lease Bond is secured through a secure third-party guarantor. Tenants pay a small annual fee for the bond, which guarantees the lease’s security to the landlord without tying up critical funds.
This has immediate and long-term benefits for business tenants, especially in volatile times:
- Preserve Cash Reserves: Businesses maintain liquidity to manage rising costs, respond to supply chain disruptions, or invest in growth opportunities without the burden of upfront cash commitments.
- Adapt Quickly: With access to cash, businesses can reconfigure supply chains, negotiate better supplier terms, or invest in tech transformation strategies that can help improve efficiencies.
- Mitigate Financial Risk: Lease Bonds protect tenants from unexpected financial strain while providing landlords with the security they need.
Attracting and Retaining Tenants in Volatile Markets
For landlords, offering Commercial Lease Bonds can be a game-changer in attracting and retaining tenants. In uncertain economic conditions, tenants are highly sensitive to cash flow constraints. Properties that offer flexible lease security options, like Lease Bonds, are far more attractive because they align with the financial realities businesses may face.
Landlords who offer Lease Bonds demonstrate an understanding of tenant needs, providing a solution that directly enhances tenant resilience. This not only makes their properties more appealing but also promotes long-term tenant retention, ensuring steady occupancy even during economic turbulence. eGuarantee is the first and only provider of cash-less Commercial Lease Bonds in Australia and New Zealand. Visit www.eguarantee.com.au to find out more.