Credit, Money Strategy: Countering the Credit Crunch

By Alison Diana  |  Print this article Print

Small businesses including IT solution providers have found it tougher to get the money and credit they need to operate their businesses, especially if they've moved entirely to services. Here's a look at the state of financing for VARs and MSPs.

Countering the Credit Crunch

There are steps smaller solution providers can take to make themselves more attractive to lenders, said financial experts.

As they evolve, VAR executives should keep a close eye on their companies’ Dun & Bradstreet ratings, recommended Dave Rhoads, CEO of Blue Street Capital, in an interview. Lenders often look at this type of report, and a favorable rating can make a strong impression, he said.

"In our world, that’s a first look for a lot of these financing companies. Some of them will pull every report under the sun. Some will pull just one," said Rhoads. "The lenders are [also] starting to rely more heavily on Experian."

Unlike personal credit reports which constantly gather information, these business financial reports require that companies self-report their trade lines, he said. Creditors will report missed payments, for example, but it’s up to a business to inform credit-reporting firms about their company’s positive payment history, said Rhoads.

"It’s just being proactive on your business credit. It’s not like your own personal credit report. Unless you’re reporting trade lines they won’t pick them up," he said. "Unless you’re reporting good ones, [only] the one bad one will get picked up."

Business owners must carefully review their company’s credit reports and keep a close eye on their financial dealings—perhaps spending more time on this task than they initially expected.

"There was a stretch for the first 18 months we were in business it felt that finance was what we spent half our time on. In reality it probably wasn’t half that bad," said Kurtowicz.

This focus on finance paid off for Serac Technologies, which has been profitable since its first year. In addition to learning the ins and outs of balance sheets and financial statements, Kurtowicz has forged relationships with the finance professionals at his distributor partners, relationships that help fuel the solution provider’s growth and client relationships.

There may be no free money. But no matter the economy, determined entrepreneurs who are willing to share their balance sheets, research their options, and dedicate time can find the funding they need to finance their business dream.