The recession has turned small businesses across the country upside down causing many to lose their businesses, life savings and good personal credit. As we experience the end of the recession some believe that banks will funnel their lending by introducing new business credit cards to the marketplace as opposed to increasing business loans.
While the government has made desperate attempts to stir up business lending by adding enhancements to the SBA such as extensions, expansion, tax cuts and tax benefits there are new opportunities emerging for the business credit industry that small business owners should pay attention to.
For example, vendor credit lines have and will continue to be the #1 source for small business lending in the country. While cash is king “trade credit is the largest use of capital from business to business and is an alternative solution that more and more business owners will resort to this year in order to fund their short-term needs. Rather than waiting on traditional funding and credit lines from financial institutions to loosen up businesses are creating their own financing opportunities.
In addition, the recession has triggered a new breed of alternative funding that small business owners once ignored. Social lending networks like Prosper.com and LendingClub.com have not only provided an opportunity for small business owners to receive loans up to $25k but at much better interest rates than offered by business credit cards. This funding solution removes the traditional lending institutions from the equation and instead allows lending transactions to take place directly between individuals. Keep in mind that you will need to have a minimum credit score of 660 in order to qualify.
Small business owners will be much savvier this year when it comes to their business credit needs and more and more owners will focus on separating their personal credit and liability from their businesses than ever before! The end of the recession is a business credit wakeup call to the small business community. Now that the majority of small businesses have weathered the storm and already negotiated lower payment terms with suppliers, lenders, and creditors it’s time to adopt a well planned business credit building strategy.
Business credit reporting companies like Small Business Equifax have experienced an increase in its business monitoring customers by 300%’! In addition the use of business information reports will see a dramatic increase this year as more and more businesses will rely heavily on business credit files in order to determine the credit worthiness of a small business.
You’ll see that small business owners will diversify their business banking as opposed to dealing with one financial institution. Total dependence on one bank to handle all business deposits, withdrawals, checks, savings, credit lines, loans, credit cards and so on will be a thing of the past. Diversification in business banking will be a new standard for the small business community and banks will have to compete for your business once again.
Never again should the capital available to your business rely solely on your personal credit and personal financial capacity. Your business should have a strong business credit file with a diverse line of access to capital ranging from vendor credit lines, lease lines of credit, business charge cards, business credit cards and bank lines of credit.
The end of the recession has triggered a growing demand in business credit reporting, business monitoring, business information reports and alternative funding options. This creates a unique opportunity for the small business community because lending institutions will have to compete for your business and offer more competitive financial products in order to win back your business.
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