In the years since the Great Recession, small businesses have struggled to find financing for a variety of needs that contribute to growth, including business equipment and business equipment leasing or for working capital loans. There are a variety of reasons that have impacted the limited financing options, such as the credit crunch in the wake of the financial meltdown of 2008. According to the Federal Reserve, the dollar volume of small business loans is growing but is still approximately 30 percent below the 2007 high.
There are multiple areas influencing growth in this sector of lending to small businesses. Here are 3 keys impacting the financial landscape.
1. Rules and Regulations Slowing Application Processing
In many cases, the problem often starts before a business even puts in their application. Lenders and borrowers are being barred from enhancing the small business lending environment as a result of inefficient laws that need updating.
Small banks, for instance, frequently feel restricted by regulations that make the lending process challenging for borrowers. Many turn to other lending sources as a result that offer a quicker turnaround but hide predatory lending rules.
feel handcuffed to rules and regulations that create a lengthier, more difficult process for borrowers and lead them to consider alternate sources of lending that may offer a faster experience but mask predatory standards of lending.
Both the U.S. Small Business Administration (SBA) and the IRS can do their part in automating certain areas, thus reducing the amount of paperwork and the burdensome waiting period for lenders and borrowers.
As more and more attention is being given to these inefficient practices, lawmakers are experiencing pressure from the industry for changes that would effectively streamline the process.
Still, while there are issues that bog down the lending process, there are still positive signs in small business lending.
2. SBA Offering More Options
While SBA regulations and rules can add time and cost to the lending process, it still offers a variety of options to small businesses. These loans are offered through a variety of lenders and could be an option for your company.
- SBA 7(a) Loans – Go up to $5 million for operations and expansion, including purchasing new equipment, debt refinance, and real estate purchases.
- SBA CDC/504 Lending – Long-term financial tool for promoting economic development in under-served communities and minority-owned businesses.
- SBA Microloans – Short-term loans of up to $50,000 for small businesses and start-up companies that may not have a lot of credit history.
All of these options, along with lines of credit, are often used for a variety of reasons, but these are often available after an extensive application process.
3. Big Banks Are Lending Again
In the world of small business lending, big banks have been noticeably absent. According to Biz2Credit Small Business Lending Index, big banks are granting one in four requests for financial funding. While the financial world’s big banks are not likely to free flow lend like they did before the Great Recession, it is clear that the lending from these sources is increasing consistently.
Part of the reason is that rising interest rates make it more profitable for the big banks and if that trend continues, then that form of lending will remain available.
Another Option: Working Capital Loans Make Lending Easy
As you can see, small businesses can access funding, but it often takes more effort to get the funding your business may need to take advantage of growth opportunities.
Many small and medium-sized companies will turn to working capital loans to get the finance necessary to get sufficient funds to run their business. Whether it be to help with payroll, rent or other business-related items, entrepreneurs from all backgrounds are finding that working capital loans are an easy and efficient way to keep their business afloat. With reasonable rates available and no collateral requirements, it is an appealing funding option.
If you are looking for working capital funding for your business, contact us for a free business loan consultation.
Combining a high level of personalized service with a cutting-edge lending platform, Formula Funding delivers an unparalleled banking alternative. We offer a fast and efficient option to get your business the critical funding it needs without the red tape. We work with all credit grades, tax liens, judgments, and charge-offs – something unheard of at a traditional bank. Since 2010 over 15,000 small business owners have used our funding sources to grow and expand.