How To Survive the Credit Crisis

U.S. businesses of all sizes and in all industries are concerned with the availability of credit this year. Following some simple steps can help your company become proactive instead of reactive during this challenging time.

John "JJ" Jongejan, Northwest Group credit manager, xpedx, a division of International Paper, advised printing company owners to think ahead for future extraordinary purchases, such as larger quantities of paper or new equipment. "As these events occur, your supplier's credit manager will most likely be required to increase your credit limit," he said.

He suggested the following 10 things that printers can do to help their company get the credit support it needs:

1. Start now to develop a relationship with the credit manager of each of your key suppliers. The credit managers you deal with will most always support you to a greater degree if they know you. Invite them to come and visit your facility and to become familiar with the nuances of your operation. Also, if it is difficult for them to meet at your company, stop by and meet them at their office.

2. Run your company profitably. Control costs and expenses so that your income statement reflects your ability to run a profitable operation. This is a positive indicator that you can manage your company and are a competent steward over your company's assets. Your company's profitability is used to help determine a key ratio that determines the credit limit extended by your suppliers.

3. Build equity in your company. Avoid drawing too much out of your business. Your supplier's credit manager will look at your company's equity position. The amount of equity in your company is used in a key ratio to help determine the credit limit extended by your suppliers.

4. Pay your bills according to the terms agreed to. Your payment history may become part of the Dun & Bradstreet database. This data is available to your supplier on a Dun & Bradstreet report, which is used to determine the credit limit extended by your suppliers. If you have a challenge in paying invoices as they come do, be proactive in contacting your supplier's credit manager so that there are no surprises. Also, develop a plan to reduce your company's liabilities.

5. Pay your company's tax liabilities on a timely basis to avoid tax liens. This is public information and it is also shown on your Dun & Bradstreet report. Tax liens do not look good to a credit manager, and will most likely reduce the amount of the credit limit that is extended to your company.

6. Share your financial statements with your supplier's credit manager. If you are profitable, and have built equity in your company, sharing your financial statements will go a long way in helping your supplier's credit manager support you. If you feel uncomfortable doing so, ask for a confidentiality agreement, which binds the credit manager to keep all information that you share confidential.

7. Contact Dun & Bradstreet to review your company's report. This is especially true if you are being denied credit time and time again. There could errors or misinformation on your report. This bad information may be costing you open terms and higher credit limits with suppliers.

8. Find a bank or financial institution that supports small business, and especially the printing industry. There are banks that have no inclination or desire to have a relationship with a printing company. There are those however, that understand the business, and are more likely to support your need for an adequate borrowing facility. Perhaps your local printer's association can help find a printer friendly bank.