Don't let the credit crunch stop your company's growth

3. Demonstrate that you are serious. We have had such a long run on easy credit that it’s difficult to come to terms with the fact that the times have changed. It was only a few years ago that lenders were standing in line to “give” money to almost any business for almost any reason and for almost any terms.

Today, lenders want to know that entrepreneurs are serious and they measure commitment in tangible ways.

For example, a company needs new equipment but doesn’t have room for its replacement until the old equipment is sold. While this is a real problem, letting it drag on sends the wrong message to possible lenders.

In the same way, newer companies – particularly those that have not been in business at least three years or those that are partnerships – need to be prepared to sign personally when borrowing. Having a spotless credit record is always a plus but so is an adequate track record.

When it comes to partnerships and Limited Liability Companies, the principals can find it difficult understanding why a personal guarantee is such an issue. Breakups occur, often unexpectedly, leaving a business with only half of the management team. Experience indicates that more often than not a business goes through a difficult period when a partner leaves. Also, with these structures the company profits flow to the individuals for tax purposes, thus requiring the personal guarantee to support the business credit.

4. Make sure the company looks good - in physical appearance and professionalism. Something as basic as the active participation in a trade association or having a professional and detailed website are just a couple more indications that a business is serious about its industry and the future.

Businesses that are willing to take these four issues seriously have a very good chance to obtain the credit they need to grow their operations. The “credit crunch” has something of a Darwinian quality to it; namely, those companies that are best prepared to thrive will be able to do so.

Edward A. Testa is vice president of sales at Greystone Equipment Finance Corporation, Burlington, MA, a company that specializes in equipment lending and leasing. He has more than 20 years’ experience in the equipment financing industry and can be contacted at etesta@greystoneefc.com or 888-894-4332.