Looser Credit Conditions Advantageous to Some But Not All

The White House launched a new effort Monday to help ease access to credit for small business owners, according to the Associated Press. Their plan is to “team with investors with the goal of buying up to a trillion dollars of bad assets from banks that have been reluctant to make loans to consumers and companies.”

This easing of credit can go a long way in helping many small businesses and entrepreneurs, but companies that are really struggling aren’t likely to gain much, according to a recent article in Business Week. Companies that need the money as a temporary fix to keep their heads above water are a perfect example. “If you have too much inventory, too little cash flow, you’re currently carrying debt that’s been called, or balloon payments are staring you in the face, adding more debt to your current situation isn’t going to help.”

So who is really intended to take advantage of this less hostile credit climate? Companies in good financial situations. “Companies currently in decent cash positions should consider plowing money back into their marketing and branding efforts, buying competitors, and accumulating more market share in this economy.” Would-be entrepreneurs with good credit scores are also in a position to capitalize.

If you’re one of those businesses that could stand to really benefit from the loosened credit conditions, then there are a couple things you should know in order to exponentially increase your odds of receiving funding. First of all, look to emphasize to lenders the part you’ll play in reviving the economy. “Banks won’t want to lend to small businesses that are going to hold the money and try to survive through the wilderness…they will want to see it invested in the economy in a way that will support surrounding businesses in the supply chain.”

In addition, I can’t emphasize enough the importance of having all necessary paperwork filled out and all documentation prepared for submission. This is not only a testament to your credibility, but it can more than help speed up the loan approval process.