Give Me Some Credit!
While some small-business owners say they are starting to feel hopeful about the future, many say they are having a difficult time getting the credit they need to fund operations or even a modest expansion.
According to a recent survey by the National Federation of Independent Business (NFIB), small-business owners report they are cautiously optimistic about the future. “The small-business sector has taken a real beating over the last year, but owners are seeing some upward movement in both sales and earnings,” says NFIB chief economist William Dunkelberg.
As business eventually picks up, however, capital will be crucial to optimizing growth. That’s one reason he believes small businesses that want to get the most out of the recovery should be finding sources of credit now.
Unfortunately, many of today’s entrepreneurs-unlike those of past recessions-are severely limited in their ability to finance a new business by leveraging the value of their home, borrowing from friends and family or securing a traditional loan. That’s the word from National Small Business Association (NSBA) Chair Keith Ashmus of Frantz Ward LLP in Cleveland, Ohio.
Without these more traditional sources of cash, he believes small-business owners will begin to explore a range of creative solutions such as:
- Factoring, or selling invoices at a steep discount;
- Accounts receivable financing, which creates lines of credit against invoices; or
- Mezzanine financing, in which lenders can convert their stake to equity or ownership in the event of a default.
Currently, many are turning to credit cards as a way to raise capital. According to a recent survey by the NSBA, 59 percent of respondents used plastic in the past year to finance their businesses, up from 49 percent in December 2008, despite steadily worsening credit card terms. Three-quarters of respondents reported that credit card terms had gotten worse over the previous six months.
Entrepreneurs seeking more information on funding solutions and critical trends faced by small businesses can access a variety of resources, including webcasts and white papers, at www.solutionsforsmallbusiness.com.
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admin | Nov 23, 2009 | Comments 0
Filed Under: Entrepreneurialism • Financing
