Thursday, November 29, 2007

Lenders Tighten Flow of Credit

The New York Times reported today that business loans flowing to American companies are drying up at a pace not seen in years based upon data from the Federal Reserve.

The Federal Reserve continues to closely monitor this credit crunch and may again respond by lowering interest rates at its December meeting.

Couple of key points in the article:
  • Borrowers with strong relationships with their banks are more likely to get approved for business loans.
  • If your industry is tied to real estate, automotive or other cyclical businesses, it will be more difficult to attract financing.
  • Half of American jobs come from small business who are considered by lenders to be more risky and thus more likely to suffer from the credit crunch.
  • Companies with collateral and a track record of cash flow will still have access to capital, often at increasingly favorable terms.
  • As the effects of the credit crunch unfold, alternative lenders including asset based lenders and community development groups like the Pacific Coast Regional Small Business Development Corporation will find more borrowers knocking on their doors.

If the credit crunch has already become a bit too close to home for your business, be prepared to consider the lenders who provide funding secured by purchase orders, accounts receivable and equipment. In some cases, the cost of these funds will be more expensive than traditional bank funding. Just remember, it's not necessarily forever - when the economy improves, your business may once again generate the cash flow necessary to obtain a bank loan.

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Tags : New York Times , credit crunch , small business loans , cash flow , asset based lenders

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