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Costs and Borrowing

As I read my final preparations for ISPA I do so with curiosity. Curiosity as to how many of you will be attending this phenomenal conference and what impact the current economy will have on your travel (or not) to Austin.

As predicted, things are changing economically. Lending is one of those things that is difficult to read. Advanta has stopped lending altogether. Care Credit is disappearing. For those of you who are carrying credit card balances, the powers that be at Bank of America, CitiBank and Chase have felt compelled to lower your limits and raise your interest rates. The SBA has raised lending limits in many states but cut staff, and loan approval and processing is a very slow process. I'm seeing a lot of rhetoric and marketing, but not a lot of lending.

This has put the kibosh on a number of large projects. This is all on the heels of a huge flurry of mortgage activity - both modifications and re-finances. So much that mortgage brokers are backed up; making the underwriting and approval a long, drawn out process. These mixed messages and uncertainty are maddening. How does this affect us?

If you need money to re-structure debt and your financial house is not in order, forget about it. Personal credit scores need to be north of 650. Business profitability needs to be defined or (at minimum) attainable if the re-structure is granted. What you are doing internally to promote and maintain clients is necessary in any lending proposal. Favorable press and client testimonials are really a plus. Break-even should be discussed in terms of the number of services you are doing today and those required with the proposed new funding. Be prepared to defend your proposal to your loan officer. It has to make sense and help stabilize your cash flow, not be the saving grace. Cash flow is everything, and this loan needs to improve yours. Take your time, be conservative and realistic in your projections.

Lenders are in business to lend money and they need to feel that you are a fair risk. This risk is based on history as well as the changes you have already made to your business in response to the decrease in sales caused by the economy. If you weren't doing a good job of managing your profitability before this economic mess hit, lenders will not feel you are a fair risk now.

So, again, how many of you will I be seeing at ISPA? I hope that, even though it isn’t cheap, that the knowledge and benefit that you will gain from the classes and networking will convince you to come. It is an investment in you and the growth of your business. We're in this business for the long haul. I hope the short-term circumstances don't get in the way. See you in Austin?