When people say things like “economic downturn” and “recession,” it’s hard to look at the big picture and it’s even harder to loosen up the pocket strings. We know it’s important to stimulate the economy, provide jobs and grow our small businesses. But sometimes the cash simply isn’t there. With banks decreasing lending over the last few years, many small businesses lack the working capital to hire new employees, invest in inventory, purchase equipment or franchise when they experience success.
During 2007 and 2008, banks shrank from lending, but in 2009 with the introduction of the Recovery Act of 2009, the government called for reduction in fees and interest rates for small business loans and an increase in small business loans capped at $5 million (please find this resource at Small Business Administration). It’s a huge step in supporting our small businesses and they now have access to working capital to help our economy flourish.
But what about the small businesses who have little or no credit? The enthusiastic entrepreneurs (smart startups)? or first-time small business owners? The trick is finding a lending institution who will treat you as a person, not an applicant. Find a lender who will sit down with you, get to know not just your business and projected sales, but the real you. Start a relationship with a lender who is interested in why you launched your small business in the first place, how you’ve built relationships with your customers and added value you to your community.
It takes a little research and a bit of digging around, but once you find a lender who is as committed to helping you grow as you are to expanding your business, the sky is the limit. There are several non-traditional lending options available for small businesses.
Micro-Loan: Small Business Administration provides funds to non-profit community lenders who in turn loan to small business owners. With a micro-loan, small businesses can borrow $1,000 to $35,000 with a maximum term of 6 years. Micro-loans typically require business owners to fulfill training and business planning requirements before a loan application is accepted (Business Finance.com/micro-loan).
Consulting Financing: A relatively new concept that helps small business owners receive $5,000 – $50,000 to contract a consultant who can help increase profits by a least 20{a61c4e1b991c7f3a090c87cb66410712d4121fe18ab0f6421d85cbe80290558f}. Repayment schedules are based on the small business’ projected future sales.
Merchant Cash Advance: A cash advance offers up to a $100,000 that is secured by your regular occurring credit receipts. The loan is paid back daily from credit card transactions and can often incur heft interest rates (Business Finance.com/working-capital).
Finding the right lending option will be up to you, but if you want to grow your small business, and you’re not sure how to do it, meet with a consultant. You’re the mechanic, the shopkeeper, the event planner, the expert in your field, that’s why you started your business. Working with a consultant allows you to focus on your field of expertise, while the consultant helps you decrease operational inefficiencies, increase working capital and help you get to that next level. What ever it may be.
