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Small Business Digest


Small Business Financing Options Do Not Seem To Be Improving

There seems to be a disconnect with what pundits are saying about small business financing and what is actually happening.

Surveys are screaming small businesses are finding it hard to get financing, yet banks report they are doing more loans in this category.

Credit unions were particularly active in this area during 2012 but new regulations are expected to dampen this loan category in coming months.

Interest rates remain low but small business leaders are being forced to pay four, five, six or more interest percents above bank prime rates which themselves are two or three points above those rates being paid by large corporate clients.

Because of slow paying clients, small businesses increasingly are being forced to factor their receivables. Funders are demanding higher fees for such services and more onerous reporting requirements.

Surveys by this newsletter’s parent, Information Strategies, Inc., particularly in companies with fewer than five employees indicate credit card financing and borrowing from friends and families is on the increase.

Observers do not think the situation will improve greatly in coming months.

The President of one company particularly active in the small business sector lending sector, Biz2Credit has some predictions for 2013.

Rohit Arora, predictions are: 

  • Interest rates for small business loans will likely increase in 2013: Lending rates have never been lower.  It is unlikely to remain this way, and the only place they can go is up.
  • Use of the Internet to find small business funding will continue to increase: Aspiring entrepreneurs have been trained to shop around for small business loans.  For a long time, big banks had the inside track.  Having turned down credit requests from their own customers, they blew it!  Entrepreneurs learned to go elsewhere for startup funding and expansion capital.
  •  Mobile devices will become increasingly important in small business finance: Youth and technological advances drive innovations in the marketplace.  People are doing more and more things on their phones.  For instance, email and voicemail are becoming obsolete as you can text just as quickly and efficiently.  Small business owners have learned to comparison shop and apply for loans online.  The next step is to do it via smart phones.  Shopping and paying bills by phone are on the rise.


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