Credit Crunching Your Business?

For months we've been hearing about the credit crunch - but for many of us, it meant the tightening of mortgages or fewer new "You're pre-approved!" credit card offers. Now, though, many small businesses are feeling the real credit crunch - the rollback of credit lines.

Even if you have good credit and pay your bills on time, credit card companies are revising their tolerance for the debt they enticed you into taking on. Those pre-approved credit cards with ridiculously high credit limits have all but disappeared. Now, credit card companies are acting like an alcoholic after a particularly bad binge - swearing "never again" just before reaching for the bottle.

Several small companies I work with have experienced this. Here's how it works. Say your company has a $50,000 credit limit on your American Express card. You've made purchases on that card for business and you've been paying bills on time, though you've been carrying a balance. Let's say your balance is $45,000. You get a notice from American Express that your new credit limit is now $45,250. Hmm. Suddenly, and without warning, you now have no spending power on this card. Doggedly, you pay another $2,500 on the card so you can make the necessary purchases for your company. Hmm, another notice from American Express with your new credit limit at $42,000. Depending on your situation, as you pay down your card, your credit limit gets lowered behind you.

Not all credit card companies are doing this and American Express, in particular, seems to be the worst offender. They tout themselves as the resource for small businesses, but my anecdotal evidence tells me they've been the least small-business friendly in these recent credit reversals.

The question for small businesses is, where do you turn? Here are a few suggestions -
1. Look to your bank to see if you have additional options with them. Unlike a faceless credit card company, you may have a relationship with your local banking staff that you can utilize to have an earnest discussion about your financial needs for your business. If you don't currently have that relationship, now's the time to develop it.

2. Look to your vendors for assistance. Though chances are good they're in the same boat you are, by working together you may be able to help each other through these tough credit times.

3. Look for options at other financial institutions. I've heard from a number of people that although credit has tightened, thus far Bank of America has continued to work with small businesses in a positive manner. Contact Bank of America (this is not a sponsored ad, just information from several of my small business clients and we might as well support those who are working with small businesses!) and see if you can get needed credit or other banking assistance from them if your own bank can't or won't help.

4. Contact SCORE. This crew of retired business executives has a vast pool of experience from which to draw and though they may never have been through this particular economic environment (none of us has), they may have had experience working with companies in need of credit or financial assistance. See if your local SCORE folks can provide ideas and suggestions.

5. Get creative. Not with your bookkeeping, with your ideas. Though your options may be limited, I've often seen how rigid people's thinking can get when faced with fear. Try to stand back and look at the situation from a less detailed view. Then, try to think of alternatives. This may require a brainstorming session with your staff or with your trusted friends and associates to churn up additional ideas. Sometimes creative ideas pop out when you're in the shower or doing chores around the house or driving in the car. Pose the question then see what pops up in the next several days - the creative mind needs time to work. (Contrast this with flat out procrastination or avoidance).

6. Think, don't worry. It's easier said than done, but when your brain is in panic mode, rational thinking goes out the window and you're likely to make bad choices. A client of mine, after starting up a business said to me about a year later, "I've run out of worry, now I just get up and do what I can." Do everything you can think of to help your business survive in this time, but try to think instead of worry. Worry looks at the closed door, thinking helps you find the open door.

Good luck folks, better days are ahead.