As the U.S. economy moves from recession into recovery, small businesses, which employ half of all private-sector employees, have been identified as a crucial engine for growth. The thought is that if small business owners can obtain loans, they will be able to produce more goods and services and hire more people. Banks are working closely with small business owners to evaluate their credit needs. An important first step is to help them understand how to put their best foot forward when applying for a loan.

Generally, banks evaluate the creditworthiness of a loan request on five criteria, called the five Cs of credit.

Occasionally businesses approach banks for a loan when what they really need is something else—to optimize cash flow, restructure existing debt or get an infusion of equity. The first two we can help with, but the latter is something banks can’t provide. Trying to finance equity into your business is a bit like finding that you are having trouble paying your bills and trying to open a credit card to cover expenses. It’s financial advice that most of us would never give someone else.

While many businesses are holding off on major investments and paying down debt, now may be the perfect time to purchase property or equipment while prices are low, provided this strategy is appropriate for your company. Take a look at where your business is. Better yet, sit down with your partners—your banker, attorney and accountant—and assess the risks and potential returns. Whether you decide on opportunistic expansion or choose to stay on the sidelines until the economy improves, by taking time now to revisit your business plan, you will likely emerge from this difficult time stronger and better positioned to grow. iBi