Small Businesses
There is no bailout for small business owners; However, as banks and alternative lenders have tightened their lending belts… small businesses can and are relying more heavily on the federal government.
Government Loans backed by the U.S. Small Business Administration are up thirty percent to ninety percent recently in the many areas within the United States when compared with last year, when new loans… well were just not getting approved. Business people also say they are noticing more banks and “commercial finance” companies lending lately, although it’s just anecdotal evidence.
Some restaurant owners are sub-coming to the onslaught of phone calls during lunch hour for factoring loans or private investors. While other companies are turning to the SBA. Some franchisees have tapped into SBA loans for some of the $500,000 start-up cost of opening a restaurant or any store.
SBA loans are being used as part of the standard up-sell feature that is offered to the prospective franchisees in today’s market.
Even if the country is doing a double flip out of recession, it is hard to spot a comeback in government or commercial lending from official statistics.
Near fifty percent of the businesses that had sought loans last year in recent months got most or all of the credit they needed. It was down from the same survey in December of 2009, when about sixty percent were able to get most or all the credit they needed.
The facts could mean lending has deteriorated, but a Federal Reserve researcher said many other factors could have caused the sliding decrease, including differences in the businesses applying for credit.
Big and small banks want to lend money, but many are not able due to they have to reserve so much money for potential loan losses. We all know the will not be any more insurance policies to cover extra risk due to the bill for it lapsed and consumers flipped the bill in the form of bail outs.
The asset-based lenders or affectionately called commercial finance companies, usually charge higher interest rates and require businesses to put up their equipment, inventory, and/or accounts receivable as collateral.
In the past asset-based lenders cut the amount of credit they’ve extended; however, in first quarter of 2001 the lenders pushed harder than ever to put money on the street. The businesses do not seem to want as many loans as they have taken out in the past years before the economy melt down.
With lending still pretty tight, more people are turning to the federal government.
In past years, a number of businesses were approved without getting a government guarantee. Now, lenders are sending the same loans moved to underwriting get the government guarantee as if it was a standard practice.
In the second quarter of 2008 (before the credit crunch struck) the SBA guaranteed millions through out the United states. Which plummeted by half in 2009, but has since rebounded to eighty percent first quarter of this year.
Some of the SBA’s momentum could peter out in the business quarters to come. Federal stimulus money allowed the SBA to guarantee up to ninety percent of a loan value, making loans more attractive to banks and traditional lenders alike. The money has since run out. The SBA will keep guaranteeing loans, but not at the same high level unless Congress will provide more money.
Most local business people are seeing some banks a little more willing to work with businesses lately and seem to be hiring some new loan officers.
While the traditional methods like the Yellow pages have seen renewal orders drop by lenders in their national books . . . the promotional product companies like Target Line are getting a few more solicitations from lenders lately, which could be a good sign. Lenders offline promotions had disappeared for months on 2010.
The small business community is not going to see some overnight miracle; however, with the right amount of patience and good research on federal stimulus help… there will be a steady increase in the lending industry to all small business owners.