Credit for business: Time to switch to “Plan C” – and the “C” stands for cash.

In the first part of my blog post about funding small business, I talked about a Wall Street Journal (WSJ) article that shared how banks were often still denying credit – despite the loosening of the credit market – for companies with under $1million in annual revenue. And, companies that exceeded that amount could be turned down for small business funding if they were in the “wrong” industries.

So, the question is, where does a “small” small business owner in the “wrong” industry go for cash to meet ongoing payroll (and other needs) to continue to grow? What can you do when the bankers are “actively recruiting the smallest of businesses –not necessarily to extend credit, but instead to process their deposits and help manage their cash flow” – so when they fit the bank’s definition of “small” and “they become ready for a loan or line of credit, the banking relationship will already be well-established?”

Times are tight for small businesses and for small business funding.

I’m sure I’m not telling you anything you don’t know when I say times have been – and continue to be – tight for small businesses. But, as we emerge from the recent credit meltdown – and credit for business begins to loosen – we are finding that not all “small” businesses are benefiting from the easing in the credit markets.

A recent Wall Street Journal (WSJ) article points out that banks are lending again, and the volume of deals in the small-business credit market reflect that trend. But, the article also mentions that things are very uneven. In fact, many companies are being shut out because they are too small or in the wrong industry. The WSJ writes that “much of the money is going to the ‘big’ small businesses.” The article suggests that “small” is a relative term, and that companies with less than $1 million in annual revenue aren’t sharing in the renewed growth in credit for business.

Credit card processors are often insisting upon cash reserves from small businesses, hurting cash flow management. How would that affect you?

BusinessWeek is calling this tactic a “brutal cash squeeze,” one that can dramatically harm even well-established companies. The article quotes the CEO of Angie’s List, Bill Oesterle, whose credit card processor wanted a new reserve of a whopping $2.5 million. “In two weeks,” Oesterle said, “we would have been in bankruptcy.”

Looking to capture a larger market share? Consider invoice factoring as your small business funding solution to go after new clients and markets.

Let’s face it. Times have been tough, economically speaking, and some of your competitors may be suffering. Perhaps poor cash flow management has prevented them from effectively marketing their business and/or from finding ways to grow their businesses.

In 2009, 1/3 of small businesses admitted to financial worries, including cash flow management problems when credit card limits were lowered.

Trends suggest that 2009 will be challenging for entrepreneurs and small businesses wanting to raise operating capital or improve cash flow management.

Scott Shane shares his perspective in his excellent article, “Top 5 Trends for Small Business Finance in 2009.”

Lack of business funding is one of the top three challenges in business today, reports the National Small Business Association (NSBA) 2007 survey.

The National Small Business Association (NSBA) releases an annual report on business financing in the United States. In 2007, 31 % of business owners surveyed listed a lack of capital as their biggest challenge.