Small Business Credit in a Deep Recession

Denny Dennis, senior fellow with the NFIB Research Foundation, let me know a while back that he was working on a new small business survey looking at the impact of the recession on credit. The NFIB released the report “Small Business Credit in a Deep Recession” today. Here are a few highlights of the report:

* Fifty-five (55) percent of small employers attempted to borrow in 2009; 45 percent did not, although five percent of owners, so-called discouraged borrowers, did not try because they did not think they could obtain credit.

* Forty (40) percent of small business owners attempting to borrow in 2009 had all of their credit needs met; 10 percent had most of their needs met; 21 percent had some of their needs met; and, 23 percent had none of their credit needs met. The current level of borrowing success is significantly lower than in the mid-2000s when up to 90 percent had their most recent credit request approved.
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Think Banks Are Out of the Woods? Maybe Not

More than $1 in every $10 that American banks have outstanding in loans is lent to a troubled borrower, a ratio far higher than previously seen in the quarter-century that such numbers have been compiled, The New York Times’s Floyd Norris writes in his Off the Charts column.

The problems are greatest in construction loans for single-family homes, where nearly 40 percent of the loans either are delinquent or have been written off as uncollectible. But they are also high in mortgage loans for single-family homes, where $1 in every $8 of loans is troubled.

The figures were released this week by the Federal Deposit Insurance Corporation, as it announced that the number of banks in trouble had risen sharply, and forecast that the rate of bank failures would increase.
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Small Business Economic Indicators

When you’re a small-business owner, issues like whether you can afford to give your assistant manager a raise or whether your dinner bread will be delivered on time loom larger than the trade deficit and crop results. Yet, the nation’s employment outlook factors into your hiring decisions and the truck that delivers your bread runs on gas — so keeping an eye on the bigger picture can help you avoid cost surprises. “If [you know] consumers are spending more in October, that might give you a bit more confidence if you’re a retailer going into the Christmas season,” says Chad Moutray, the Small Business Administration’s chief economist.

While the economic recovery is still tentative — and credit remains tight — small-business owners could help themselves in 2010 by monitoring the macroeconomic picture. Already, members of the Board of Governors and the presidents of the Federal Reserve Banks, have projected that the U.S. economy will expand between 2.5% and 3.5% this year. Meanwhile, the unemployment rate is expected to fall to between 9.3% and 9.7% from November’s rate of 10%, and economists from Morgan Stanley expect that a more sustainable recovery will sink in, as the financial markets improve, risky assets continue to fetch higher prices, and bank lending improves.

In the absence of your own economist or strategic planning office, what indicators should you keep an eye on? Here are five that often matter most to small firms.

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Obama Outlines $30 Billion Small Business Loan Proposal

By Christine Lagorio | Feb 2, 2010

At a town-hall meeting in New Hampshire, President Obama outlined his plan to increase hiring in small businesses by granting local banks $30 billion in loans.

Naming job creation as his priority for 2010, President Barack Obama pitched his $30 billion loan program proposal Tuesday to help small businesses grow their companies through increased hiring.

In Nashua, New Hampshire, Obama said he hopes to take money repaid by Wall Street banks as part of the $700 billion bank bailout known as TARP to create the Small Business Lending Fund, which would provide capitol to community banks to spur economic growth on Main Street.

“These are the small, local banks that work most closely with our small businesses – that provide them their first loan, and watch them grow through good times and bad,” he told a crowd of more than 1,500 at a Nashua North high school.

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7 Rules for Building a Successful Business

There are many rules associated with establishing and running a successful business. Indeed, there are a number of things you can do to contribute to your success as a business. But here are 7 basic rules that you can use when building a successful business. Keep reading to discover great rules to use to succeed in business.

1. Don’t let your accounts receivable get out of control. First of all, it is vital to have an organized accounts receivable department. You need to know who owes you what, and you need to know who is making payments. You also need to make provisions for following up on invoices that owe you money. An efficient workflow needs to be maintained so that you are receiving payments in a timely manner for your goods and services.

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Recession Over? You’re Having a Laugh

Following the Treasury’s announcement that the Gross Domestic Product (GRP) increased by 0.1% in the last quarter of 2009, how many of us really believe that this piffling improvement over a three months period proves that we are now out of recession and 2010 will herald a return to the halcyon days of full employment and bulging order books. Probably very few – at least amongst those who are not confined to a mental institution.

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Surge in Loans is Unlikely From Small-Business Plan

President Barack Obama’s plan to divert $30 billion of federal bailout funds into new small-business loans will prop up thousands of struggling entrepreneurs but is unlikely to break the lending logjam.

“This is a good start. But it’s a small start,” said G. Michael Moebs, chief executive of Moebs Services Inc., a Lake Bluff, Ill., research firm specializing in U.S. banks.

The $30 billion in Troubled Asset Relief Program funds targeted by Mr. Obama represent about 4.3% of the $700 billion in small-business loans held by U.S. banks and savings institutions, according to the Treasury Department. As of November, the 22 largest banks that got capital infusions through TARP had $257 billion in small-business loans, the Treasury said.

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Business Financing 101: Learn How Invoice Factoring Works

Business factoring is not new. However, it is quickly becoming an increasingly popular option for companies looking to raise capital quickly and without taking on new debt. While some businesses have been using invoice factoring for some time, others either have not heard of it or only have minimal knowledge regarding it. This article will act as somewhat of a brief introductory course, a business financing 101, so that readers can learn how invoice factoring works. Hopefully, businesses will begin to understand that this is an extremely effective and fast way to infuse cash into their coffers.

Invoice factoring requires three things, a business that invoices their customers and has outstanding receivables, a reputable factoring company, and customers with good credit. If all of these things are in place, it may be possible to strike a deal.

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Payroll Financing

We all know that the banks do not provide a friendly credit environment to small, growing businesses. If they offer any money, it usually isn’t enough. This often leads to an inability to grow your company due to a lack of funds. Well, there’s a type of financing out there that is greatly increasing in popularity in our industry. It’s called factoring, also known as invoice factoring, accounts receivable financing, or purchase order financing. This type of financing concentrates on your customer’s ability to pay, not yours.

Factoring is the sale of your accounts receivable (invoices) to a funding source at a discount off the face value in return for immediate cash. The funding source is known as a factor.

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Financing Your Business During A Recession

During a recession it can be extremely difficult to finance a business, much tougher then it would in an otherwise healthy economy. Banks are very slow and hesitant to give out loans because the likelihood that they will be paid back significantly decreases. Bank loans are difficult for new companies to receive even in a strong economy. It generally takes really strong financials, lots of assets and it requires that the company has been in business for a good amount of time before a bank feels comfortable lending them money.

The problem is that a large percentage of companies do not meet these criteria. As a result, many businesses are left out in the cold with the burden of finding a way to finance their endeavors and growth. In this article, we will take a look at why you should consider using invoice factoring to finance your business during a recession.

There are many benefits to invoice factoring.
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