As the economy shrinks and money becomes tighter, many small businesses are finding it more difficult to gain access to the credit or loans they need to in order survive and grow their businesses. Because this money has become harder to access, many are referring to this time as a “credit crunch” by banks and lending institutions. Yes, it’s true more requirements are being enforced by said parties; but, there is still money to be had and help to be found from both banks and the government.

In fact, banks haven’t changed how or why they give credit for new or expanding businesses, according to Angel Rodriguez, senior vice president and Florida business banking market sales manager for PNC Bank. “There is something of a misconception of the crunch,” he says. “I don’t think that banks have changed the credit policy so much as the fact that the balance sheets coming in are a bit different from what they used to be.” Businesses and banks alike are facing new challenges and because of that, they are taking a more cautious approach to lending. “Our business is about risk management,” says Rodriguez. “Still, if you deserved a loan before, odds are you can still get one.”

What Rodriguez and his team are noticing now more than ever before is that businesses are coming to them for help with cash flow as an alternative to loans. “What [banks] do best is leverage a businesses assets so they can grow,” he says. “What we find is when they come to request credit, sometimes it’s not that they need the money to grow but they need help with cash flow to manage their business appropriately.” By helping with receivables, many businesses can avoid taking out loans altogether says Edward Kozmor, vice president of media relations, PNC Financial Services Group. “Businesses now are coming to banks trying to find solutions to their needs instead of us just requesting credit or lending products at a time when that’s a little much for a business to take on,” he says.

Even though some banks are trying to help their business consumers in other ways, what about those that still need credit? It’s there. Just know that it may take a bit longer than it used to and businesses may be required to present more information. “Are we taking a closer look at our criteria than ever? Sure we are,” says Rodriguez. “It’s about running our business effectively, taking a closer look at their business and managing to that bottom line.”

Remember, banks are not the only option when looking for money. Thanks to the American Recovery and Reinvestment Act, small businesses can look to the Small Business Administration (SBA) for help in addition to commercial lenders. Many area small businesses may be eligible for interest-free loans under the America’s Recovery Capital (ARC) program allowing them to take out loans of $35,000 to pay down existing business debts. Borrowers pay no interest on the ARC loans and repayment does not begin for one year. The act will also allocate $375 million for temporarily eliminating fees on SBA-backed loans and raising SBA’s guarantee percentage on some loans to 90 percent. There is also $30 million for expanding SBA’s Microloan program available.

No matter where they go for credit, businesses should be prepared to have a good conversation about cash flow first and be prepared to share their financial history, openly and honestly, with their potential lender. “If we don’t have the right information, we can’t provide the right guidance,” says Kozmor. “What works really well is those businesses that come prepared and willing to share, they are going to be more successful in getting what they need now and into the future.”

Article by Corey Gehrold