Small Business Borrowing Slows: How Are You Funding Growth?

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Fewer U.S. small businesses are borrowing money for expansion according to a national index. This may reflect caution on the part of small business owners unwilling to take on additional debt in an uncertain economy, but as we will see in the roundup below, other options exist for obtaining funding. Businesses can also find ways of stretching existing resources to grow.

Borrowing Outlook

Small business lending down in April. Small business lending is down for the fourth straight month, according to the Thomson Reuters/PayNet Small Business Lending Index. The index measures the volume of US small business lending and showed a drop from 96.0 in March to 94.1 in April, indicating businesses are playing it safe instead of borrowing for future expansion. Reuters

Funding from SBA is now here if you want it. Small businesses were desperate for enough funding to stay alive back in the early days of the Great Recession, but now they have access to an unprecedented $30 billion in SBA guaranteed loans for buying more equipment and hiring more staff, says SBA Administrator Karen Mills. It appears, at least here in the US, that availability of funds is not a problem. The Huffington Post

Tighter lending requirements hurt Australian small business. Availability of funding hasn’t been the case everywhere. Small businesses in Australia have had it tougher than their big corporate counterparts when it comes to financing, thanks to tighter lending restrictions instituted after the 2008 global downturn. The Reserve Bank of Australia revealed the findings at the nation’s first small business finance round table held to gain a better understanding of how Australian small businesses are funded. The Sydney Morning Herald

Other Funding Sources

Other sources of small business funding. Lending is far from the only source of financing for business expansion. A number of other funding sources exists today, ranging from former employers and alumni to family and friends. Don’t forget to seek these lesser discussed options as an alternative or supplement to traditional funding channels. Growth University

In the U.S., crowdsourcing will soon become another option. A new law will soon allow companies to sell stocks on the Internet, but the U.S. Securities and Exchange Commission must first hammer out the details. In fact, lobbying groups have already been created to advocate for the new funding approach. Bloomberg Businessweek

Getting your money from clients and customers. One alternative to borrowing for small business expansion is to get better at collecting from customers and clients. The trouble is that with each passing month your chances of recovering money owed from a delinquent account decreases, says Jacqueline Taylor, associate region director of the University of Houston Small Business Development Center. Here she offers some advice. The Houston Chronicle

Improve your odds with investors. A number of issues will have investors passing over your business in favor of others competing for their attention. Some of these problems include an inadequate business plan, an inexperienced team, or an opportunity that is not large enough or growing, says startup expert Martin Zwilling. If these problems exist in your business, you are likely to have more problems attracting needed funds. Startup Professionals Musings

Healthcare tax credit won’t help much. Created by Congress in 2010, the tax credit was part of the healthcare system overhaul leading to the new reform package and was intended as an incentive to encourage an estimated 83 percent of U.S. small businesses that currently provide no healthcare coverage for employees to do so. The trouble is that many businesses either don’t qualify or will barely see enough of a credit to cover their costs. Bloomberg Businessweek

Stretching Your Resources

Make use of online resources. Google is introducing a new “Business Builder” for small business marketers to include Google+ local pages, AdWords Express, additional Google offers, and other new features. Taking advantage of full service online resources can offer a low cost option for marketing and managing a small business from the first day of operation.  Search Engine Land

Invest wisely in your marketing. Spending the right amount on your marketing campaign can be the best way to stretch your business’s resources without needing to look for additional funding. Careful investment in your marketing involves figuring out a reasonable budget, determining the most efficient way to spend it, and then carefully tracking results to determine return on investment.

2 Reactions
  1. Anita,
    Thanks for the helpful information on alternative sources of funding and the state of small business borrowing. For those who still pursue a traditional bank loan, more than likely they’ll have to sign a personal guarantee to gain approval. Many of them are probably not aware, however, that personal guarantee insurance is a new option that protects against personal asset loss in a default scenario. You can learn more here:

    Mitch Lubin
    Asterisk Financial