In a tightening credit market, smart planning, strong relationships, and the right financial partner can help small businesses stay resilient and ready for what’s next.
It’s no secret that today’s credit environment feels tight. Interest rates are higher than they have been in recent memory, economic uncertainty looms, and many business owners – especially in manufacturing and distribution – are trying to figure out what’s next. For some, it’s about finding a way forward after a tough couple of years. For others, it’s about trying to grow, but running into roadblocks when seeking financing.
The good news? Even in this environment, opportunities still exist, especially for businesses that are intentional about their credit strategy.
The current landscape
We’re seeing a mixed picture. On one hand, some companies are thriving, especially in sectors like homebuilding and infrastructure. But in other areas, projects are stalling due to uncertainties such as tariffs, supply chain disruptions, and rising costs. That uncertainty makes lenders more cautious, particularly when it comes to riskier or unfamiliar businesses.
Still, we lend to good businesses. And “good” isn’t always about having a perfect balance sheet. It’s about being well-run, thoughtful, and prepared.
At First American Bank, we look for businesses that are proactive – those that have surrounded themselves with the right people: a strong CPA, a trusted attorney, and a banker they speak with regularly. That tells us they’re managing their business seriously. And in today’s environment, that goes a long way.
What lenders are looking for now
As always, we want to see that a business owner has some skin in the game. That could mean capital invested, deep industry knowledge, or a clear path forward. Since the 2008 financial crisis and again after COVID, many smart business owners have learned the value of liquidity. Cash reserves matter. Having a plan matters. Knowing how to ride out tough seasons without overextending yourself matters.
And while personal credit scores don’t always make or break a deal, they still play a role, especially when the business is small or there’s a personal guarantee involved. If there are red flags, we’ll talk through them. But more often than not, the bigger story is what matters.
A real-world example
One of our clients, a family-owned Wisconsin-based manufacturer, is a great example. They produce industrial heat exchangers used in power plants – large, complex projects that can take 12 to 18 months to complete. When COVID hit, their overseas contracts disappeared. Then, their bank was acquired, and the new institution chose not to support them. Although viable projects were coming back online, they had no credit line to fulfill them.
Through the SBA Export Working Capital Program, we were able to step in and provide financing. That gave them breathing room and allowed them to renegotiate payment terms with customers, including 50% upfront payments. That shift enabled them to fund much of the production cycle themselves. Now, instead of relying entirely on a bank, they’re in a stronger position to support their own growth.
Solutions like this don’t happen overnight. It comes from listening, understanding the client’s situation, and finding the right fit – not just for now, but for the long haul.
How to strengthen your credit profile
If you’re looking to improve your credit readiness, start with the basics: organize your books, develop a clear business plan and build relationships with professionals who know your industry and can offer candid advice.
A few resources I regularly recommend:
- Local economic development agencies: Many counties offer revolving loan funds and free business planning support.
- SCORE: This national nonprofit connects business owners with retired executives for free mentorship.
- Professional networks: Ask your banker, accountant, or attorney for referrals. The right people can make a big difference, especially when you hit a roadblock.
And remember, not all funding has to come from traditional loans. SBA programs, working capital lines, and invoice financing can help bridge gaps. Especially in industries with long project cycles, flexibility is key.
The value of partnership
At First American Bank, we pride ourselves on building relationships. When a client hits a rough patch, we don’t walk away. We engage, we problem-solve and sometimes that means tough conversations or restructuring debt. But it always starts with trust.
If your business is facing uncertainty, now’s the time to get your strategy in shape. You don’t have to navigate it alone. A strong partner can make all the difference.
Get in touch to learn more about how First American Bank can support your business.
