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Money to Burn

Smaller companies continue to face a credit squeeze.
Scott Leibs, CFO Magazine
March 1, 2012

Cash may be king, as the cliché has it, but if so then the king has, of late, been entirely too content to just sit on his throne.

Last year we wrote several times about the enormous cash hoards that companies possess, and how reluctant they have been to part with any of it except for the inevitable share buybacks.

This month we look at another source of bulging coffers, or perhaps we should say brimming vaults: those of banks, large and small, many of which have been bolstered by a recent spate of federal lending programs intended to get credit flowing. Whether banks have availed themselves of those funds or not, there is plenty of money on hand, but not enough in hand — at least, in the hands of smaller companies, which report that credit remains maddeningly tight. Banks of all sizes respond that they are eager to lend to companies that make the grade, but are not willing to grade on a curve.

It's not all bad — some statistics indicate that a far greater percentage of credit-seeking smaller companies are getting the funds they need today than they were 18 months ago — but it's nowhere near optimum. It is, as our cover story makes clear, a case of "Capital vs. Confidence," and confidence has been slow to pick itself up off the mat. But our story does offer some specific steps that companies can take to boost their chances of reaching favorable terms with their bankers.

Elsewhere in this issue we talk about a different arena of business in which a little preparation can go a long way toward ensuring success: business-continuity planning. Over the past decade, companies have begun to think of business continuity (or "disaster recovery") not only in terms of restoring IT systems, but more broadly as an area of risk management that is at the heart of making organizations more resilient to many forms of disruption. (See "To Be Continued?") And for a different take on risk management, see our latest Deep Dive Survey, which finds CFOs surprisingly optimistic about the balance they've struck between being too cautious and too aggressive in their overall management of risk.




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