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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.

By Jennifer Pellet

Opinions expressed by Entrepreneur contributors are their own.

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

Sure, you will have to make concessions and consider termsunheard of in those glory days when VCs, banks and other financingsources bid against one another for a chance to supply funding withfavorable terms and few strings attached. But even in a tightmarket, terms are negotiable, and fending off unreasonable demandsnow can help stave off disastrous consequences later. So whenjudging the benefit of potential funding, be on the lookout for thefollowing red flags.

  • A lender undervalues your company--andwon't budge. Always a thorny issue, valuationdebates are more heated than ever in today's post-downturnmarket, says Joe Heller, managing director of Plainview, NewYork-based NextLevel Venture Partners. Heller notes that whileventure capitalists and entrepreneurs rarely see eye to eye on thesubject, there are some gaps too wide to bridge. "If all theVC is interested in is rock-bottom pricing," Heller says,"that should raise a flag that they're trying to takeadvantage of the times."