Gimme Some Credit

Is your bank folding up the credit tents? Don't panic.

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Question: I just got a letter from my bank telling me that my company's credit line has been cut by 50 percent. I need that credit line to buy the inventory to grow my business. Any suggestions? 

Answer: If it's any consolation, you're not alone. Hard hit by the subprime mortgage crisis and tightening credit markets, banks and credit card companies have cut back on lending in all arenas. The first step is to call your bank and find out why your credit line has been reduced, says Mike Espenshade, vice president of operations and CFO at pre-settlement legal financing firm Cambridge Management Group and a virtual CFO who works with small to midsize businesses. Once you get a bank officer on the line, you may be able to persuade him or her that your company has the cash flow necessary for you to be able to comfortably handle a larger line of credit. If that doesn't work, start shopping around for credit from other banks and credit card companies that are more eager to do business with you. You may also want to look into nonbank financing strategies like factoring (selling your receivables at a discount), negotiating longer payment terms with your suppliers or selling a minority stake in your company to investors to raise the cash you need to keep your business humming. "There are plenty of contingency-based reverse auditing firms that will come in and find recoverable monies," says Espenshade. "All of these will help boost your cash flow and reduce the pressure on outside financing."

—By Rosalind Resnick, who is the founder and CEO of Axxess Business Consulting, a New York City consulting firm that advises startups and small businesses, and is author of Getting Rich Without Going Broke: How to Use Luck, Logic and Leverage to Build Your Own Successful Business. Reach her at rosalind@abcbizhelp.com or through her website, abcbizhelp.com.

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