The recession has taken its toll among the shop keepers on Main Street.
The Small Business Administration reported that its 7(a) loan volume plunged 36 percent, to $673 million, in 2009 versus the prior year, as legions of banks slammed their vaults shut on small businesses looking for financing.
However, all hope is not lost: Enter the CPA.
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Stacy Kildal, owner of Michigan-based accounting firm Kildal Services, has helped several of her clients successfully gain capital. The key to helping her clients in this tight lending market - networking groups and the local Chamber of Commerce.
"I know what the banks are looking for, and it makes it easy to get all the ducks in a row for my clients," she explained.
For example, Kildal helped a client with an auto repair shop receive financing to buy a new building and open a second repair outlet. "I did it by suggesting the lenders take an in-depth look, not just at my client's P&L and balance sheet, but I invited them to visit the operation, speak to customers. And I showed them our accounting processes."
It made all the difference, she said: "The big national lenders couldn't be bothered, but my client ended up having two local banks and a private investor competing for the loan. The client should be opening the doors to the shop in December."
HELPING SMALL BUSINESS CLIENTS
"In a good economy, our clients will always come to us when searching for, or restructuring, their financing. Over the past 18 months, I have had more requests from clients to assist them in obtaining capital than in any comparable prior period," said James Bourke, CPA and a partner at New Jersey-based WithumSmith+Brown.
Accountants are in the perfect position to evaluate their clients' financial conditions, make introductions to the relevant type of lenders and recommend a variety of available alternative strategies.
Bruce Zicari, partner-in-charge of the small-business advisory group at Pittsfield, N.Y.-based Bonadio Group, feels that small regional banks have not been as affected, and lending has stayed consistent.
"We strongly encourage our clients to plan ahead, to communicate with their banks and to watch their business models and cost structures," explained Zicari. "If a business has a strong balance sheet and strong equity, they can weather the storm and banks will work with them."
Being proactive by discussing cash needs and issues with clients and their lenders is proving helpful. "Waiting until cash flow has gotten dangerously low has not been helpful for clients, so we always suggest that our clients start the dialogue with lenders sooner, rather than later," said Lori Drucker, a CPA at New York based-Citrin Cooperman & Co.
Bourke agreed: "Being proactive works. Take your clients to lunch or dinner - let them know that your firm can connect them with the lenders that can help."
