The Cash Flow Blog

Credit is tight.

Small businesses – large ones too – are learning quickly lines of credit can shorten overnight.  And without notice.

This article from WashingtonPost.com – Tight Credit Squeezing Small Businesses – has a lot in it for small businesses to learn and be aware of.   The point of the article is a level of relief is on the way for businesses in need of credit – lenders participating in SBA programs will soon have more latitude to make money available to more businesses.  That’s good news.

But there are other things in the article that led me to share it with you – the story of a business owner who learned overnight his credit lines were reduced from $56,000 to $1,000.  Ouch!  Credit line reductions can have a devastating affect on a business – reduced capability to purchase raw materials and inventory, inability to meet payroll, etc.

What stood out in the story is a reminder credit reductions happen without notice.  And the only reason the business owner in the story learned about the reduction when it happened is because he subscribed to a credit monitoring service.

Another thing that stood out is the closing paragraph – character still counts.

“The reason we made the loan was character, although of course we closely look at credit and other things as well,” said Vickers, who was impressed with Fochler’s ability to increase sales yearly and his accuracy in reporting his taxes. “His knowledge of the industry and his passion and dedication made it clear to me that he has a strong shot at succeeding.

“He’s the perfect client.”

Give the article a read.  There’s good insight to how lending institutions are operating in today’s market and good information on changes with SBA loans beginning February 2009.