Borrowing at your peril

08 February, 2008
With a possible economic recession looming, Tony Phillips has some choice advice for bakers on borrowing if they want to survive the hard times
Page 13 
Have you ever wondered why we pay taxes for an Army, Navy and Air Force? No one is going to invade us. If they did, they could never afford to live here and buy a house. Plus, what would be the point in invading us, as most of their friends and family already live here?
So we could save all that money on defence spending and put it all into grants for whatever crazy cause you could think of. One could even use the savings to reduce the National Debt, although that train of thought might be a little radical.The economic news does not look good. We may be in for inflation and/or a recession. Now, you may well ask, "How will we know if we have inflation?" Well, it's a little like having a wallet full of notes and being broke. You also realise that the best time to buy new equipment was a year ago.How will you know if we are in a recession? If you see a wedding and the guests are sweeping up the rice to make a pudding, it's a good hint. During the last recession, I remember putting a 10p piece in a telephone box and the operator said "God bless you, my son'.You may well be thinking, "How do we avoid this economic disaster?" I'm not sure of the answer to that one, but one way is to keep buying British Baker. Then, at least, I will still have a job and you will be able to read how others are doing and not feel alone.If we hit a recession, the great thing is to have as little borrowing as possible, as if cash flow falls, you are in a better position to survive. How well I remember every recession I have lived through; I was always over-borrowed, although I only ever borrowed to buy equipment and I will always believe that having decent equipment made it possible for me to survive. I would never use an overdraft facility to buy capital equipment. I always prefer old-fashioned hire purchase; you have a fixed rate and, providing you made the payments, they never bother you. That's different to a bank, which is always snapping at your heels if you go over the limit.While I have always taken enormous care never to exceed my limits, I will never forget just how tough it was at times. With my house up as security, I always had the fear of the family living in a hostel, thanks to my obsession with wanting my own business.Now, however, my MD Neville does all the work and, if times get hard, he only has to stop having Sundays off and going to bed every night and I should survive! I am always telling him we should have one of those single-handed night bakers they used to advertise for in British Baker. The savings would be enormous: think of it, only one salary and when we arrive in the morning, all would be baked and packed waiting for us.



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