Cash crises happen. the way they're managed can have a tremendous effect on a company's all-important relationships with creditors. "Credibility and confidence are built slowly but destroyed rapidly," says David Preiser, head of restructuring and managing director at the New York City office of Houlihan Lokey Howard & Zukin, an investment-banking house based in Los Angeles. His recommendations for breaking bad news to loan officers, vendors, and other creditors:

· Develop a credible plan. It may require getting advice from a lawyer or an accountant, but it should resemble an action-oriented business plan. "It won't convince creditors if it's just a short-term dance, but it also can't be too gloomy, or they'll panic." Aim for a realistic assessment, and then focus on how you'll fix problems. Above all: "Never promise anything you already know you can't achieve."

· Telephone your creditors to suggest meeting with them and their lawyers. Schedule meetings before payments are due; mention but don't fully describe your difficulties; divide in order to conquer. (Don't bring creditors together so they can "gang up on you.") Another tip: "Don't schedule the meeting after you've run out of funds. Always leave yourself enough to make a tiny payment and demonstrate good faith."

· Behave appropriately during that meeting. To Preiser, that means being respectful, confident, and strong. "If you seem prepared to tackle problems, you'll inspire creditors' respect. If you seem overwhelmed, they'll panic."

· Beware of vendor panic. You don't want to scare vendors "into refusing to make shipments." Preiser's advice: "Don't treat vendors dishonestly," but don't bare your soul. "Achieve a balance between present problems and future hopes."