The real heroes of the business community over the past several years are not the high-flying software developers or the companies that have ridden the crest of the telecommunications boom.

Rather, the true heroes are the Rust Belt manufacturing companies that endured a brutal recession and took the painful steps necessary to be competitive in a global marketplace. And now these companies face an interesting challenge of a different sort.

Any such company - let's call it the Graduate - is now looking at impressive earnings based on an improved marketplace in an expansionary economy. And with a much more permissive credit market, the Graduate is faced with the temptation to increase its borrowing in order to expand in this improving environment.

This creates an equally interesting challenge for the lender: The bank must help the Graduate maintain the discipline it acquired during its struggles to protect profitability in the early 1990s.

In late 1988, this familiar type of company began its period of tumult with a seemingly desirable achievement. Then a manufacturer and marketer with annual sales nearing $20 million, the company completed an agreement with a major new customer.

As a result of the agreement, sales would increase more than $3 million in the first year and more than $5 million in the following period.

In reality, the sales increase turned from boon to burden as the company and its new account, along with much of the U.S. economy, began operating in the difficult, cautious economy of the late '80s and early '90s. During that time, the company preserved its profitability by radically altering many of its practices. Excessive costs disappeared along with two facilities. The company sold a corporate aircraft.

Senior executives accustomed to corporate conferences and industry retreats began spending their time in direct supervision of company operations while middle levels of management disappeared altogether. Finally, the company completed a profitability analysis that convinced it to give up its large, uncertain new business opportunity.

The Graduate came through the difficult five-year period with modest profits and flat sales until recently.

Now, with indications that credit will be available from a variety of sources, the Graduate faces great opportunities as well as great temptations. The company has had to work hard to tighten its belt and is eager to reward itself for its sacrifice and discipline. But if competing lenders supply the means for satisfaction of old business habits rather than modern business needs, credit will be a problem rather than a solution for the company.

The good counsel provided by a lender that understands a customer's business as well as its capital needs can save many companies from sliding back into the corporate lifestyles they've just pared away. This is no time for thinly justified gratification of business appetites held in check for four or five years. Today's marketplace remains competitive and quick changing; companies with excessive cost structures and poorly concentrated resources soon become overwhelmed. At that point, an unexpected change in the economy can pressure profits and threaten the company's existence.

The challenge for the lender is to provide the customer with advice that considers the troubles as well as the gains of expansion in a growth economy.

Too often, lenders weighing a credit request feel squeezed into making an all-or-nothing decision. "Either I give them what they want or they'll go to another lender." And there is a further fear that if there is any resistance to the financing request, the company will feel unappreciated and abused.

This is not an easy position for a lender to be in. You feel like the parent of an excited adolescent: "Just give me the keys to the car, never mind the itinerary."

There is a way to solve this problem, in my view, but it involves an enhancement of the lender-borrower relationship.

And it takes a sure-handed lender to communicate the following:

"Our bank is prepared to support your requirements, subject to our review of your business plan and projections. For your sake and ours, we need to get comfortable that the expanded operation can meet its obligation and that we - borrower and lender - are not betting the proverbial farm on the proposed next step."

At this point, the lender's requirements and parameters need to be made clear. The borrower must know what features you are looking for to achieve that feeling of comfort. Taking a page from our collective turnaround experience, here are a few of the big pieces to consider:

Management. Is the team adequate because the business has been downsized, and will they be overwhelmed again if the business is expanded?

Marketplace. Does the core business justify an increase or is it expanding into peripheral areas that will be the object of the next round of downsizing?

Break-even-point management. Is growth based on an increase in variable costs that can be managed downward in the event of a softening in the company's marketplace, or is the company adding a significant layer of fixed costs that will require dynamite at a later date?

Accounting controls. The last time the company had problems, its officials didn't know their costs - didn't know what segments were profitable and which ones were losers. Has that been fixed? If not, how would they know if they are expanding in the right direction?

Financial resources. Can you comfortably give them the money they need or do you have to squeeze out every dollar to cover their requirements with no cushion for Murphy's law?

Fortunately, the response to a financing request from an existing borrower does not have to be "hell yes" or "hell no."

A prudent evaluation of the business will benefit the borrower more than the lender, and will actually enhance the relationship.

But the conditions and parameters must be communicated explicitly and in a positive way, so that the analysis process is perceived as valuable and not as a series of impediments. After all, our collective turnaround experiences are worth something, in the form of preventive medicine rather than an ambulance.

Mr. Silverman is president of Silverman Korenthal & Co., Skokie, Ill., a turnaround consulting group.

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