The Small Business Dilemma: It isn’t all about credit!

I was interested to see a front page story in this past Sunday’s Hartford Courant.The story was about small business, and featured Hygrade Precision Technologies, Inc., a fellow CTMA member. Hygrade’s President, John Salce, has been an outspoken activist on the behalf of Connecticut manufacturers. He is featured in this story, which dispels the myth that small businesses are lacking credit because of banks unwillingness to lend. Salce candidly shares his challenge of meeting his debt obligations when his business has been hampered by economic decline.

Horst Engineering doesn’t have any credit issues, though some of our lenders have changed the terms of loan agreements. When we renewed some credit lines, we were faced with the introduction of rate floors, a practice that banks are pushing with fervor as major rate indices hover at all time lows.  Leading up to the financial crisis and subsequent recession, we had managed our balance sheet wisely. Thus, we didn’t face challenges when the orders slacked off. The same cannot be said for many other small businesses. Many overborrowed during the good years, and then when sales plummeted, they didn’t have the cash flow to service their debt.

Banks lend based on your past performance, asset base, history of success, strength of management, and forecast profits. Banks are not to blame for making this crisis worse. Businesses need to manage through the crisis, build stronger balance sheets, balance their debt obligations, and grow their revenues. Hypothetically, if  Horst Engineering could borrow even more money, it wouldn’t change our fiscal outlook. Our growth has been impacted by sluggish demand for the products we sell. Borrowing more, or borrowing at more competitive rates, isn’t going to change that.

We are re-engineering processes in an effort to improve service with our existing customers while diversifying into new markets; both in an effort to grow again. Only increased revenues and profits will get our business and the rest of the economy moving again. Sure, credit isn’t as freely available as before this downturn, but that is a good thing. We can’t create jobs out of thin air and the banks are not to blame for this. Small businesses should be revisiting their value proposition, eliminating waste, and finding new ways to benefit their customers. Executing is harder than ever, but it needs more focus than ever.

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Horst Engineering

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Awesome morning at #elmcitycx the #ctseriesofcx finale. The kids did great. So did the Masters. Great season. Many of us are done after today. A few of us are headed to Nats. At the moment, all of us are frozen! #newhaven #cyclocross #teamhorstsports #teamhorstjuniorsquad #crossspikes @horsteng #lifedeathcyclocross ❄️🚴🏽⛄️🍺 @bentwaterbrewing #bentwaterbrewing #pulpfiction #lynnlynnthecityofsin Overnight with @boyscoutsofamerica Troop 25 at the 4-H Camp in Pomfret. The toboggan run was hairy! I just watched. #boyscouts That moment when @trailrunningmom discovered that our longtime #Christmas Tree 🌲 supplier is a regular student in her #yoga class. They previously hadn’t recognized each other when not wearing #yogini gear. It was great to hear how our farmer has improved her strength and flexibility since she took over the business from her late husband. Note: preparing our menorah for #hannukah takes less work than this! Lovely December day for #Cyclocross at Goddard Park. @nbx_bikes #nbxcx @vittoriaseries #teamhorstsports #teamhorstjuniorsquad @horsteng #crossspikes #rhodeisland Lovely day for more than 130 #BoltonLandTrust members and friends at the annual Walk of #Thanksgiving #bolton #connecticut 🌲 #blackfriday didn’t start so badly! Great day at the #manchesterroadrace @shenipsitstriders #shenipsitstriders #silkcitystriders #teamhorstsports #thanksgiving 🏃🏻 If I always had the option to commute by train 🚂, I would take it. #multitasking 1h45m each way if uninterrupted productivity and NO driving. I even squeezed in a lap of #centralpark with Tim. 🏃🏻#manhattan #newyork

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