by Charley James

Created on: April 09, 2008

Help lenders say "yes" in the middle of a credit crunch.

In fact, emerging and midsized businesses always feel a credit pinch first. So, smart borrowers realize that their business and financial plan must tell a story that's more than a spreadsheet and sales goals. The really smart ones also know that many non-bank lenders are eager to finance a good story even when money is harder to find.

The on-going efforts by European and US central bankers to head off a credit crunch may not be successful. Even if they are partially successful, it is clear that money is getting harder to find and more expensive, reflecting greater risk. When emerging and midsized businesses need funding to expand, it becomes more important than ever that they approach the right lenders with the right story when credit is being squeezed.

For example, a profitable, mid-sized company in the Midwest had ambitious expansion plans but its bank was acting like a truculent child about lending the money. The lending officer said the bank would lend some, but not as much money as was needed to implement the entire expansion plan. Figuring they had no alternative, company executives sighed deeply and dramatically scaled back the expansion goals.

By default, the business allowed the bank's risk tolerance level to influence its expansion model.

This sad situation is not all that uncommon, especially for fast-growing or emerging businesses. But the truth is that being turned down by one lender need not end up re-defining the business model even if money is harder to find. Put bluntly, though, many executives and owner-managers alike stymie their companies' growth and profitability by not doing an effective job of helping lenders say "yes."

Too few executives understand that a financing plan needs to tell a story compelling enough to convince an uninformed reader the lender of the plan's merits. All too often, financing plans are actually just sales plans that fail to create for the reader an overall impression of the company.

The plan must explain what the company wants to do and how it will do it and in a way that someone not in the industry will understand. It should describe the business and its objectives, and provide an overview of the market and the company's niche in it. It should explain why customers need what the company is providing, identify who they are and explain how they will be won over and retained. It should also be realistic about the competition. In other words, it should show that the

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