Many financial analysts have speculated at the current state of the lending marketplace and more importantly the cause for the current state of lending in this country.  Most studies end up inconclusive despite theories that demand is low, quality of applicants is low, and lending criteria has tightened.  Certainly the common perception among small business owners and other members of the financial community is that traditional financial services are more difficult to get today, whether its a business line of credit, business loan, or other small business oriented lending service.

As members of the financial community involved in actively seeking out interested parties and attempting to piece together opportunities that prove profitable for all parties, we have heard from many of our competitors and colleagues that demand is low, quality is low, and lending institutions are tight.  And so, we turn to the market analysis.  Attached to this article are the findings of the Federal Reserve Bank of New York in a small study conducted over the summer of 2010 taking a closer look at lending in New York.  Unfortunately, the findings are fairly inconclusive which may or may not be partly due to the small sample size for a study like this.

Lending Analysis

Still, I find it interesting that this study narrowed it’s view to a list of products that includes the following: personal credit card for use in business, change in limit on existing credit card, business loan, financing for vehicle or equipment, extension of existing business line of credit, new small business credit card, and new business line of credit.  No mention of business cash advances or Purchase Order financing, two of the fastest growing financial services of today.  I wonder if the data would have been terribly skewed if they had included those services.  For starters, chances are many of the businesses that were polled will have no idea what either of these services are, but a decent chunk of these business will most definitely have applied for one or both of these products.

This study attempts to ascertain what criteria lenders are paying the most attention to when determining approvals and have concluded that time in business and profitability were the most important factors.  Sadly, if we only lend to already profitable businesses who are well-established in our field, lending is likely to cease to exist.  More or less, we’re admitting that what we want to do is lend to those who have no need for it, or whose need is based in a desire to grow or expand in a way that current retained earnings would not allow.  However, there is most definitely a fear that if lenders continue down this path, there will be an even greater disparity between the upper and lower classes with the middle class continuing to disappear at an even faster pace.

But if there’s one thing we’re short on these days it’s solutions.  There is no obvious solution, and more so, who will be charged with changing the face of American lending and how will you enforce those changes?  Caution is a virtue, but risk and reward go hand in hand.  It will take bold ideas and risky entrepreneurs to turn this around, and there seems to be a noticeable shortage of those individuals in the financial sector today.

According to an article on FOX Business today, the U.S. Treasury has scheduled a conference for next month to outline a plan that will provide small businesses with easier access to capital. Two new initiatives are already going into effect, the Small Business Credit Initiative and the Small Business Lending Fund.

While both programs boastfully speculate that billions of dollars are being put into the economy, some critics are not so sure. One of these programs “offers” banks low interest government loans with the “hope” that they’ll lend it to small businesses. The other program has awarded states with free money that have “promised” to apply it towards business sectors that are “likely” to need private financing. While these strategies should work in theory, history has proven otherwise. If lending money to banks was going to spur lending, it would’ve worked when they did it in 2008. We shouldn’t expect different results from the same course of action.

Fortunately Sure Payment Solutions is a privately financed firm. Our funding specialists are providing businesses with millions of dollars every year.

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The United States economy has declaredly come out of the recession, and while the stock market has managed to climb back up and the administration is hard at work attempting to create jobs and assist new businesses, there is undoubtedly a lasting impression from the recession that most people probably can’t quite put their finger on.

Just 5 or 10 years ago, the country was full of dreamers.  Individuals with grandiose plans to make it big, live the American Dream, and turn rags into riches were plentiful.  College graduates had aspirations and ambition, drive to make their dreams come true and the determination to make it happen.  But the feeling is different now.  It’s not a tangible factor that has changed the mood of this country, it’s a crash back to reality from years of living the high life (or dreaming of the high life).  It’s as if we were all happy little kids with our favorite color balloon on a string and all at once, we all lost our balloons and started moping about.

While this analogy may not relate directly to the economy, the image is what I’m going for.  Dreams have been squashed and most people dare not dream anymore.  The best  you can hope for is a steady job, benefits, and enough money to pay the bills and simply keep on living.  While there’s nothing really wrong with this, it’s certainly not the principles this country was founded on, and it definitely has the effect of deflating the party a bit.  So, what has happened?  People are worried about another recession, one far worse and more detrimental.  Individuals and families are putting more money away than they had previously, taking fewer trips, and spending less.  While we all understand this behavioral pattern, the truth is that a consumers failure to spend will only hurt the economy more.

A larger problem is on the business level.  While there are hundreds of individuals looking for a start up business loan (which are nearly impossible to find), existing business owners are fearful of taking risks, extending themselves, making an investment unsure of the return.  It’s this fear that is currently preventing many businesses from taking the next step and getting back to the American Dream.  Hard work, dedication, and a few risks are necessary to turn a small business into an empire, and even though most people are more content to exist within the status quo, there are still opportunities out there.  All businesses can make improvements, expand, grow, and prosper.  It may be more difficult than it was a few years ago, but that doesn’t mean it’s impossible.

It’s about taking a risk, refusing to be content with the status quo, and demanding better for yourself.  Any business owner who stops thinking about what they can do to increase profits, lower costs, and reach a larger audience has already decided to fail.  There’s only so long a business can last without a captain at the helm intent on pushing the boundaries and facing the risk head on.  For those bold enough to follow their hearts and refuse the lackadaisical contentedness that so many have adopted over the past few years, there are still plenty of ways to secure the funding required to take the kind of leap we are talking about.  Fear is the true enemy, and the best way to defeat it is to face it head on, take the risk, and join the thin ranks of those who continue to thrive, even in a time when most are simply managing the status quo.  Sure Payment Solutions can help you get there with our funding options and other business services.  Take a chance, and maybe you’ll be ahead of the game when the next recession hits.

A revolving line of credit works a little differently from a traditional business loan.  When the bank approves your business for a line of credit, they’re basically committing to lend you up to a certain dollar amount at any given time.  You don’t, however, have to draw down the whole line of credit all at once.  You get the benefit of only paying interest on the money you need.  It’s good because once it’s there, you know you’ll have access to capital whenever you need it.  Additionally, every dollar of principal you pay down makes a dollar available to you at some point in the future.  It’s similar to a credit card.

What do you do when you’ve maxed out your line of credit?  Chances are, the bank isn’t going to be willing to extend your maximum.  Many business owners turn to a business cash advance in this situation.  Business cash advance providers look at a completely untapped asset:  your future credit card revenue.  Business cash advance providers purchase those future sales at a discount.  It’s paid back by assigning a small fixed percentage of every credit card transaction towards the balance on the advance.  Some cash advance providers allow you to use this tool similarly to a business line of credit.  You don’t have to pay off your whole balance in order to qualify for additional funds.  You can usually draw down again once you’ve paid in just 30 – 40% of your balance.

The other advantage of this type of financing is that it’s not reported to the credit bureaus.  It won’t affect your debt to income ratio and if you decide to apply for a business loan or a line of credit, the bank won’t see the business cash advance listed on your credit reports.

Here is a link to a page on our site that lists many of the benefits to our small business loan programs.  Check it out!

Small Business Loans