Credit Crunch Squeezing Good Businesses along with the Bad

We all know a Credit Crunch is upon us. Unfortunately, the shortage of available credit has spread from marginal businesses to encompass established, profitable businesses as well. In September, business owner Drew Greenblatt asked for a $175,000 increase to his line of credit for his thriving wire products business. The bank declined to do it unless he put an equal sum into a certificate of deposit. (Credit Crunch Puts Squeeze on Businesses, Business Week, Oct. 5, 2008.)

In Ohio, banks are refusing to renew lines of credit and calling in loans made to decades old family businesses that are current on payments. According to one local workout attorney, “It’s not just sick businesses. These are healthy businesses.” (The Credit Crunch and Small Business, Business Week, Sept. 26, 2008.)

Not surprisingly, according to the Federal Reserve’s July survey of senior loan officers, 65% of banks have tightened credit for small businesses.

David Glass, President of Business Credit Services, an 8 year old Las Vegas firm that helps business owners obtain credit, complained that they “used to have little trouble getting $50,000 credit lines for new business owners with 640 FICO scores. Now banks want to see scores of 720 and companies at least 2 or 3 years old.” In addition, he “had 50 or 60 banks [they] could send people to with the basic $50,000 or $100,000 credit line. Now there are maybe 5 or 6.” (The Credit Crunch and Small Business, Business Week, Sept. 26, 2008.)

No doubt working capital loans and unsecured small business loans are becoming harder and harder to get. At some point, most businesses will need a working capital loan or an unsecured small business loan. What should a successful small business owner do to protect his or her business? Here are 2 ideas steps you can take.

First, establish a relationship with a nontraditional lender. Banks and credit unions are not the only lending institutions out there. Research other lending sources and establish a relationship with one or more. Next, once you find an alternative lender, put a working capital loan or line of credit in place. Once you have an unsecured small business loan commitment or line of credit in place, you can turn your attention back to running your business, knowing you have a ready source of funds available.

Advance Restaurant Finance, LLC (ARF) is a licensed lender that specializes in restaurant funding solutions, restaurant loans, and other working capital loan solutions. Among other products, ARF has an unsecured small business loan line of credit with no application, maintenance, or access fees. Call ARF at 866 702 4430 or apply online today and get the working capital to help your business grow.

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