All Articles Tagged "business loans"
Could Cash Advances Put Your Business Behind?
(Inc) — It’s no secret that small businesses are looking for alternative financing sources. A Pepperdine Universityreport released in July found that 61 percent of banks said they were turning down tradtional loans that they might otherwise have granted because of changed regulatory practices and the current economic climate. Enter merchant cash advances. While technically not a loan, a cash advance is a lump sum (usually less than $150,000) given to a business owner in exchange for a specific share of future credit and debit card sales. And thanks to quick approval and almost instant access to capital, they’ve recently become a go-to, albeit risky, source for some small business owners. The practice, which is mostly unregulated, drew attention in 2008 and 2009 when credit dried up. At the time, the number of providers exploded to around 50 (up significantly from the dozen or so at the beginning of the decade), and some small business owners complained of fly-by-night advance providers charging usurious rates.
Banks Back to Business Lending
(Wall Street Journal) — Here’s news that should offer little comfort to people struggling to find work: Bank loans to businesses are expanding, but those businesses aren’t using the money to fund expansion. So far this year, banks made $61 billion more commercial and industrial loans–an increase of %6.2%–than in the year-earlier January to August period, Federal Reserve data show. Commercial and industrial loans are business loans excluding real estate. Between January and August last year, such loans fell more than 11% from the year-earlier period.
More Entrepreneurs Looking for Gov't Loans
(Wall Street Journal) — Amid tougher lending standards and riskier times, a growing number of small-business borrowers are seeking federal government loan guarantees to loosen the purse strings at their local bank, according to SmartMoney’s latest Take Two profile of 50-plus entrepreneurs. With several weeks left in the fiscal year, the Small Business Administration’s two main lending programs have already surpassed arecord-high $18 billion in guaranteed loans issued through banks and other conventional lenders, agency data show. That’s more than double the full-year total in 2009. Depending on size, SBA loans are guaranteed for up to 85% against default. Like many borrowers, Alan Green, a former television news photographer who is the subject of this week’s profile, was initially turned down by three banks for a loan he needed to buy an ailing Molly Maid franchise in Salt Lake City. Yet after applying for an SBA 7(a) loan, Green, 59, had a check for more than $100,000 within a matter of weeks.
How to Make Your Business Bank-Friendly
(Businessweek) — Most small businesses turn to banks for credit to smooth out their cash flow, regardless of the economic environment. Securing lines of credit, however, remains a challenge for many companies. Although banks have raised their standards, small businesses need not throw in the towel. Here are three ways to make your company “bankable.”
When Loans Depend on a Deposit
(Businessweek) — A bank should not make your loan approval contingent solely on whether you open an account with them, but it’s not unusual for them to request that you establish a depositor relationship. In this case, the nonprofit endowment fund could help boost your local bank’s capitalization and give it easier access to the loan collateral if your window-cleaning business defaults. If you’re uncomfortable moving the endowment money to the bank, talk to some other local banks about their lending practices and see whether you might qualify for an SBA loan guarantee.
Banks Eager To Do Business With Local Gov’t
(Wall Street Journal) — Time was running out for the Orange County School Board. A $105 million debt deal was about to expire, triggering painful penalties for the approximately 175,000-student district in the Orlando, Fla.-region. Along came Wells Fargo & Co. with a deal that avoided the penalties: Wells bought the $105 million debt from investors and negotiated new terms with the district. ”We got a good deal,” says Richard Collins, the district’s chief financial officer. Such deals are cropping up in many cities and states across the U.S. Teams of bankers are blanketing the country pitching transactions like the one in Orange County, as well as traditional loans, to government officials, people in the industry say. While big banks still are tight-fisted with many homeowners and small businesses, they see cities, states and schools as one of their least-risky ways to put to work some of the piles of cash that have amassed on their balance sheets.
Recession Lingers for the Little Guy
(Wall Street Journal) — Many big public companies are likely to report strong second-quarter profits, but that isn’t the story on Main Street, where small businesses are grappling with jittery customers, rising costs and tight credit. The owners of many small businesses say economic uncertainty and inflationary pressures have led them to delay hiring and capital expenditures. Seventy percent have no plans to expand their staffs over the next 12 months, according to a recent U.S. Bancorp survey of 1,004 U.S. companies with annual revenue of $10 million or less. While about half projected higher revenue a year from now, 78% said the U.S. economy is still in a recession, and many expected it to remain there next year. In May, for the third month in a row, the optimism index of the National Federation of Independent Business declined.
Raising Capital? Start With These Sites
(Entrepreneur) — Crowdsourcing has moved to the money arena, tapping the power of larger audiences to provide funding options for startups and established businesses. A host of websites dedicated to crowdfunding are popping up, matching small businesses, soloists and artists with people willing to invest in projects they find worthy of support. In most cases, fund-seekers simply sign on to one of these sites, create a profile and start asking for money. Naturally, investment sizes vary depending on the individual investor and the specific website’s regulations. For example, you’ll find that some sites specialize in small investments, while others require a minimum commitment.
Crowdsourcing Start-Up Capital Catches On
(Wall Street Journal) — Some small-business owners, rejected by banks or fed up with bad lending terms, are turning to Internet sites that match borrowers with giant pools of lenders when they need funds. That has driven growth and increased the public profile of a sector that was briefly shut down by regulators during the financial crisis. In the past year, Prosper Marketplace Inc. and Lending Club Corp., which run the nation’s two biggest peer-to-peer lending sites, have reported a sharp upturn in personal loans used to fund small businesses. The sites work like eBay-style marketplaces, matching prequalified borrowers to lenders. Together, the sites have generated more than $500 million in personal loans in the past five years. And while most of the loans are used to pay off credit cards, the proportion of the funds used to finance small businesses is rising. In November, Nansee Kim-Parker raised $20,000 on LendingClub.com in less than two weeks to open TokyoMoto, a San Francisco motorcycle-repair shop. After clearing a prescreening process, she posted details of her background and her business idea and attracted hundreds of small lenders from around the country. Her loan has a three-year fixed interest rate of 9.85%.
Discriminatory Lending Plagues Minority Business
(MDBA) — Capital access remains the most important factor limiting the establishment, expansion and growth of minority-owned businesses. Given this well established constraint, the current financial environment has placed a greater burden on minority entrepreneurs who are trying to keep their businesses thriving in today’s economy. In this study, Dr. Robert W. Fairlie and Dr. Alicia Robb provide an in-depth review and analysis of the barriers to capital access experienced by minority entrepreneurs, and the consequences that limited financial sources are placing on expanding minority-owned firms. Minority-owned businesses have been growing in number of firms, gross receipts, and paid employment, at a faster pace than non-minority firms. If it were not for the employment growth created by minority firms, American firms, excluding publicly-held firms, would have experienced a greater job loss between 1997 and 2002. While paid employment grew by 4 percent among minority-owned firms, it declined by 7 percent among non-minority firms during this period.
