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Cash Crunch

Don't let investors and lenders use that old "it's the economy" line as justification to put the squeeze on your business.

This story appears in the February 2002 issue of Entrepreneur. Subscribe »

No question--it's scary out there. The ever-tightening capital market has many cash-hungry souls grabbing the first deal dangled before them, and that's a dangerous plan at a time when investors and finance companies are demanding onerous terms.

Sure, you will have to make concessions and consider terms unheard of in those glory days when VCs, banks and other financing sources bid against one another for a chance to supply funding with favorable terms and few strings attached. But even in a tight market, terms are negotiable, and fending off unreasonable demands now can help stave off disastrous consequences later. So when judging the benefit of potential funding, be on the lookout for the following red flags.

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