The Financing Outlook for Small Business

Over the past month or so, politicians in Washington, D.C., seem to have finally heard the message from Main Streets around the nation: If you want to help the economy, help small businesses. The federal government has proposed and launched several initiatives to help increase access to capital for small firms. One of these would transfer $30 billion to a new Small Business Lending Fund that could be accessed by community banks.

But is lack of access to capital really what’s stopping community banks from making loans? I don’t think so and neither does Jim Blasingame, creator and host of the “Small Business Advocate Show,” the world’s only weekday small business radio program.

“Washington says that banks aren’t lending money to businesses. And if they’re talking about big banks they’re right,” Blasingame says. “But every community banker I’ve talked to says they’ve got lots of money to lend. Access to capital isn’t the problem. The problem is that small businesses aren’t asking banks for loans.”

A recent survey conducted among business owners and executives by Forbes Insights and CIT Group confirms it. Only 11 percent of respondents said they had sought new lines of credit or financing over the past year in an effort to help improve their cash flow. Also just 11 percent said that their greatest cash flow challenge in the past year was difficulty in securing financing.

But while loans are available to help well-run small businesses finance growth and working capital, there’s no question that they’re harder to obtain than they used to be. In this environment owners need to be more agile, flexible, and transparent. Lenders have expanded their reporting and recordkeeping requirements, and they’re more closely monitoring financial performance. They’re also examining collateral in more detail to ensure that borrowers can repay their loans.

The Forbes Insights/CIT survey revealed some interesting findings with regard to how business owners feel about their companies, the overall U.S. and world economies, and Capitol Hill’s effort to break the recession.

• Respondents were mostly optimistic about prospects for their companies this year, though they were more cautious about the overall economy in general. More than half (61 percent) expect their companies’ revenues to increase this year, primarily because the recession has forced them to work harder and smarter than they ever have before.
• More than three-quarters of respondents (78 percent) believe they will have to learn to adapt and do business in new ways in order to succeed in a more competitive marketplace.
• Very few respondents believe that policies enacted by the federal government are helping the recovery. A full 90 percent said that the economic stimulus has not benefitted small business. However, a majority (58 percent) do believe that proposals to raise Small Business Administration loan limits will be helpful to small businesses.
• Most encouraging is the belief among owners and executives in the power of small business to drive the U.S economic engine. An impressive 83 percent feel that small businesses will play a major role in helping lead the economy in the recovery.

What doesn’t kill you makes you stronger, they say, and this seems to be how business owners feel about their prospects for success this year and beyond. “The survival strategies that companies use during a downturn can often aid them during the resulting upswings and make them more resilient,” the report noted.

“U.S. small businesses are looking ahead to 2010 in anticipation that the ordeal of the 2009 recession may be fading,” it concluded. “Having made it through the economic trauma, business owners are hoping that the hard lessons they’ve had to face will provide them with the discipline and control necessary to help ensure their success.”

Tracy Eden is national marketing director for The Commercial Finance Group in Atlanta. CFG provides factoring and accounts receivable financing to companies nationwide. Contact him at tdeden@cfgroup.net or visit CFG to learn more.