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.

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."

WS+B also emphasizes that its staff know where to find sources of capital and lenders. "We are able to cut to the chase. For example, some lenders will not deal with clients in the restaurant industry, and knowing this ahead of time will allow us to not waste time and effort in pursuit of capital or financing in the wrong places," said Bourke.

Meanwhile, Howard Hoff, CPA, of New York-based Marks Paneth & Shron, suggested alternative strategies to increase cash flow besides financing. "Sharing space and personnel will help the client reduce expenses, which could be just as effective as obtaining new or additional financing," he said.

RETURN TO BASICS

Andre N. Chammas, a director at Miami-based Morrison, Brown, Argiz & Farra, believes that a greater and more viable opportunity exists in working directly with your firm's small-business clients.

Here's how:

* Policies and procedures should be re-examined in strategic areas such as accounts receivable, accounts payable and inventory.

* Expenditures need to be analyzed and evaluated in order to trim any unnecessary fat.

* Companies need to ask themselves if they can do more with less. Areas of concerns are staffing/labor costs, supplies and maintenance. These areas require analysis for their effects on cash flow and whether or not they are vital requirements of the operation.

The bottom line is that CPAs have to put on their chief financial officer/controller hats.

"As the economy continues to struggle, the success of our clients may depend on the fidelity of the services and information we are able to provide," said Chammas.

THE FUTURE OF SMALL BUSINESS

Emergent Research and Intuit's financial institutions division, Digital Insight, gathered two dozen leaders from small and midsized financial institutions for several roundtable discussions on the current trends in small-business lending.

The Intuit Future of Small Business Report (http://about.intuit.com/futureofsmallbusiness/) found that while many large financial institutions have slashed their small-business lending activities, smaller lenders such as community banks and credit unions are still actively providing small businesses with credit and credit services.

The discussions also revealed that:

* Have money, will lend. Most of the smaller lenders represented at the discussions are actively and even aggressively seeking to provide credit and credit services to small businesses.

* Lending standards remain high. Credit qualification standards at most of the banks represented aren't any more rigorous now than in the past, but these institutions have stringent underwriting criteria for granting credit.

* Unsecured credit is disappearing. Small business' access to cheap, uncollateralized credit - especially through consumer credit cards - is being cut.

* Small Business Administration loans - a mixed view. Lenders differ on the value of offering SBA loans. Small businesses looking for an SBA loan through a bank or credit union need to find institutions participating in the SBA loan program.

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