There's a funny dynamic at play in the credit markets these days.

There's no shortage of loan funds for the strongest companies with rock solid balance sheets, but it's another story for outfits that might be pinched for cash and really in need. To read the full Banking & Finance Quarterly, please click here .

"The guys that don't need the money, they can get all they want," said Tim Turner, managing director of Wachovia Capital Finance, an asset-based lender in Pasadena specializing in lines of credit from $10 million to $1 billion. "If you are off by just a few degrees your alternatives are limited."

Not exactly the kind of yin and yang that makes the business world go round.

But don't despair. Where there is risk, there is also potential for profit and that is no less the case for the lending industry.

So while traditional big bank and Wall Street funding sources are drying up, various other lenders are stepping up and looking for new business, even amid a souring economy.

This Business Journal special report examines how companies large and small, healthy and distressed can tap into this money vein and get the funds they need to grow their business or just hang on.

Of course, it's no surprise that there's a credit crunch and businesses across the nation are finding it difficult to fund expansions, factories and other vital enterprises.

The hangover from the years-long residential lending binge has been head splitting, with record mortgage defaults and a slowing economy souring lenders on even business loans unrelated to real estate.

That attitude is reflected in a recent Federal Reserve survey of senior loan officers, which revealed that nearly 32 percent had tightened credit standards for large and middle market commercial and industrial loans, while 80 percent had pulled back on commercial real estate loans.

But then there are folks such as Bank of Manhattan, a new local community bank with a clean balance sheet, ready and willing to fund loans of a few million dollars.

In Pasadena, hard money lender Crawford Park Financial is willing to lend in exchange for asset-based collateral. There also are hedge funds, factors, and others.

And despite the maelstrom on Wall Street, big money players such as JP Morgan Chase & Co. are willing to deal, but remember the terms aren't nearly as favorable as they were last spring.

Simply put, don't expect to get as much bang for your buck.

"During the bull market, companies were able to get historically high levels of debt funding. They might have been able to raise five or six times net cash flow," said Bernie Zaia, managing director of Los Angeles-based Barrington Associates, a division of Wells Fargo Securities. "Now they are probably lucky to get a multiple of 3.5 or four."

The big question then is: How long will the lending squeeze last?

As recent as earlier this month, many economists were expecting the home market to turn around and with it the larger economy by some time next year. But after last week's collapse of Bear Stearns and continuing declines in the home market, many are putting a recovery off until 2009.

But not every projection is that pessimistic.

Locally, the UCLA Anderson Forecast, which made its name calling the recession of the early 1990s, is now playing the optimist.

"Corporate balance sheets are very strong. By and large, there is a lot of cash and strong profit flows, and that makes them less needy for new loans," said UCLA economics Professor Edward Leamer and director of the forecast.

"The real economy lives and dies on the basis of real investment, such as building offices and factories, or buying equipment and software. So far we haven't seen corporate spending deteriorate in a way that is consistent with a credit crunch."

Indeed, Wall Street breathed a sigh of relief last week and the markets rebounded when Goldman Sachs and Lehman Bros. released better than expected earnings only to turn south again on renewed worries.

But even Leamer is warning that no one should expect that the economy will return quickly to the strong growth of the past decade. The decline in home equity value is just too great and that's likely to reduce consumer spending for some time to come.

"People are not using their homes as an ATM, and that is definitely a drag going forward," he said.

Nor should anyone expect the easy credit terms of the past several years to return soon. Leamer noted that while the value of residential property nationwide jumped from $5 trillion to $10 trillion over the past five years, the implicit rent increased by a much smaller margin.

"There is at least $3 trillion and maybe even $4 trillion of losses that have to be put on someone's balance sheet," Leamer said. "To the extent that homeowners feel they can walk away from their homes, it is the lenders who will have to absorb the loss."

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