Getting small business funding during economic downturn
What’s the upside to losing your job during an economic downturn? The freedom to start your own business. It might seem counterintuitive, but half of the businesses on the Fortune 500 list began during a recession or bear market, according to a study by the Kaufmann Foundation.
When money’s tight it might be more challenging to open an affordable business and get the small business funding you need for your startup, but it’s not impossible.
• You always need a thorough business plan to get small business funding, but when money’s tight make you must include contingency plans.
• Make sure your business is recession-proof by offering an alternative to similar, more expensive services or products. For instance, the average cost of a wedding has dropped from an all-time high of nearly $30,000 in 2007 to around $17,000. Why not be the wedding consultant who specializes in elegant, scaled-back weddings?
• Lenders appreciate that franchisees benefit from training, management support, name recognition and shared marketing, so they might be more likely to approve small business funding for the right franchise business.
Lenders will be more likely to provide small business funding to applicants who have built cost-saving measures into their startup’s business plan. For instance:
• If possible, start with an in-home operation. Even if your home needs minor renovations to accommodate your new workspace, that’s less expensive than new construction or a commercial lease.
• Consider sharing space with another business if you can’t operate your business from home.
• Rent your office furnishings and equipment or buy them used.
• Tap into the talents of unemployed friends and relatives to save money.
Once you’ve acquired small business funding, how can you improve your chance of success?
• Network through your local chamber of commerce or professional association.
• Barter services with other businesses.
• Customer service is more important than ever when people are pinching pennies. You need their referrals.
• Offer first-time customers discounts or gifts. Give them additional discounts for each referral.
• Take advantage of free or low-cost classes through the Small Business Administration, or local community colleges or technical schools.
Business Line of Credit
Starting or running a business without a business line of credit is like jumping out of a plane without a parachute: it can be done, but seldom with the desired outcome.
A business line of credit is an invaluable asset during those inevitable brief periods when accounts payable can’t wait for assured accounts receivable. Other common uses for a business line of credit include covering unforeseen expenses or an investment in equipment, inventory or personnel required for a particularly lucrative project.
A business line of credit is usually obtained from a business bank, and requires only common sense criteria for approval:
• Does your business show a positive cash flow?
• Is there enough profit to make monthly payments on the credit line?
• Is the projected revenue and cash flow adequate to make the payments?
The same criteria that determine whether the business line of credit will be approved will determine the amount of the credit line, and repayment terms. Collateral isn’t usually required for a business line of credit, though an exception could be made for a business or individual with a low credit score, or inadequate cash flow or projected cash flow.
The interest rate and terms for a business line of credit is usually variable, allowing banks to adjust to changing market conditions. For instance, during a period of economic downturn a business’ line of credit may be decreased, the billing period shortened or the interest rates increased.
Business owners should do extensive comparative shopping before accepting any credit line. Let American Unsecured advise you on your suitability for different options and help you find the best solutions for your business needs. Since its founding in 1999, American Unsecured in one of the largest loan consulting firms in the United States and helped their clients get hundreds of millions of dollars to keep their businesses and the county strong. Let them help you too.
Personal loans for credit card debts?
Credit card issuers have gotten pretty nasty lately. They’ve abruptly closed accounts, lowered limits, increased interest and shortened terms. Suddenly, what were affordable monthly payments have created a real budget squeeze, with payments that be entirely impossible to make in full or on time.
If you’re in this predicament, it’s time to consider personal loans. For many people and many reasons, they provide an attractive option to making—or worse, not making—those monthly credit card payments:
- Personal loans have lower interest rates than many credit cards.
- Personal loans can be paid off with lower monthly payments.
- Personal loans can actually improve credit scores damaged by credit card debts too near their limits.
- Even when personal loans aren’t enough to pay off all credit card debt, they reduce the ratio of available credit to credit balance.
- When personal loans are applied to pay off a significant percentage of a credit card balance, the credit card issuer may agree to a lower interest rate.
- Personal loans can be obtained quickly and easily online.
- Personal loans are typically unsecured loans, meaning they don’t put personal assets such as homes at risk.
- Personal loans are by far a better option than payday loans, which often carry annual interest rates between 300 and 700 percent.
Financial pressures affect quality of life in so many ways; marriages, families, professional opportunities, and physical and mental health all suffer as financial difficulties mount.
Though personal loans might not be a panacea for all of life’s challenges, they are a viable option for millions of people, and might improve your situation, too. Explore your options with American Unsecured.
Bank lending survey brings good and bad news
If you’ve been trying to get a business loan, you already know that bank lending has bottomed out during the recession. However, there are some signs that recovery might have begun, and that banks are at least thinking about loosening the purse strings a little.
The Federal Reserve System just released their July 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices, a summary of bank lending practices from April through June, and respondents’ projections for future lending.
Their findings on bank lending for small firms (annual sales less than $50 million):
- 35.8% said they tightened lending standards.
- 38.9% said they tightened collateralization requirements.
- 25% tightened maximum size of credit lines.
- 46.3% tightened standards for approval of commercial real estate loans.
- 24.2% decreased limits on business credit card accounts.
- 26.5% decreased business credit lines limits.
- 42.8% decreased commercial construction credit lines.
If none of that sounds like an indication of looser purse strings, bear in mind that these numbers are actually better than in the previous quarter.
The second half of the survey addressed projected trends in bank lending—specifically, when do the loan officers expect their respective banks to make money more easily accessible to business borrowers. Their responses regarding commercial mortgages provides a glimpse into the future of bank lending for business owners.
When will your bank return to earlier standards for commercial mortgages?
- 0% said end of 2009.
- 2.2% said first half of 2010.
- 22.2% said second half of 2010.
- 20% said 2011.
- 40% said their standards would remain tighter for the foreseeable future.
American Unsecured is a loan-consulting firm, which means they can help you get the best terms and rates for your business’ financial needs. Whether you need a start-up loan or money for an existing business, American Unsecured can help.