Accessing Capital in a Tight Credit Market

Many business owners and prospective business owners are discussing how difficult it is to access capital in this market. The fact is the credit market is tighter than it has been in a number of years. Banks are concerned about regulators; therefore, they are requiring more documentation and standards are tightening. However, accessing capital for growth and expansion, for commercial real estate purchases and for business acquisitions is achievable. Consider the following to position your business for accessing capital:

• Know Your Financial Health – Know what’s coming into your business (revenue) versus what you are spending (expenses). No longer can that responsibility be solely delegated to a bookkeeper. Business owners must be clear on their company’s financial health and projections for the future. A healthy balance sheet and income statement that shows positive trends or clear adjustments for sales shortfalls is essential. In this market, don’t hesitate to make adjustments that will improve your bottom line. Waiting too long could negatively impact efforts to access capital.
• Be Attentive to Accounts Receivables (A/R) – Business owners often obtain credit from suppliers and provide credit to customers. Today, CEOs must be attentive to the accounts receivable cycle of their customers. When A/R has not been received in 15 days in a 30-day cycle, a call should be made to the customer. Reducing the A/R cycle improves a business’s cash flow, which is essential in accessing capital.
• Explore SBA Resources – The U.S. Small Business Administration (SBA) has several programs to assist small businesses in working with banks. SBA provides a guaranty program and a direct lending program. The guaranty program provides a 75-85 percent guarantee to banks for providing capital to small businesses and the direct lending program funds up to 40 percent of project costs for real estate, equipment or tenant and leasehold improvements. In this market, this proves to be a valuable resource to lessen the credit risk to banks.
• Take Advantage of the Market – Commercial and industrial real estate prices are down 25 – 30 percent. If you currently rent space, now is the time to explore being an “owner” versus a “renter.” Real estate owners are able to reduce their tax liability and could create additional income with rental space. The SBA 504 loan program allows owners to rent up to 49 percent of their real estate; requires only 10 percent down versus 30-40 percent conventionally, provides low and fixed interest rates; and provides longer terms so that monthly payments are manageable.

Business owners can access capital in today’s economy and there are numerous resources available to help. To find out more information about SBA programs and other resources for small businesses, contact AmPac Tri State CDC, a non-profit certified SBA lender at (909) 915-1706 or visit our website at http://www.tristatecdc.com/.