Articles by Salesh Chand
2008 was a year all of us would like to forget. It was the year when the global financial crisis (GFC) hit and many individuals, businesses and countries went bankrupt, redundancies happened in their droves, unemployment went up and government cutbacks were the norm.Those of you who have been through other recessions will attest that this was definitely one for the record books. But as a country (New Zealand) we have managed to bounce back from the worst of it with businesses starting to employ again and books starting to appear in the black, as well as the housing sector still creeping up in value. Don’t be fooled though, as we all know too well another recession will hit; it’s not a matter of if, it’s a matter of when.
You see in 2008 and onwards, everyone ran out of cash, the banks would not lend, the value of assets such as properties reduced in value, people and businesses were cash-strapped, as everyone was spending funds based on a predication that 2008 was going to be another growth year. In reality, 2008 came with major recession and cash flow difficulties, consumers suddenly realised that they did not have funds to run their business or even afford mortgage payments. This is when the majority of the high leverage investors started to fire sale their assets in order to improve their cash flow. Some investors had to go bankrupt, some ended up with minimal assets, and others got by without any issue. Why is that?The investors that got by without any problems during the recession were cash rich or had cash facilities in place, so when they really needed the cash it was there to get them through the hard times. Below are some of the important points to remember and to utilise, because we all know another recession will hit; we just don’t know when or how hard it will be.
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Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.
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