So far 2014, it’s become crystal clear. We’re smack dab in the middle of a finance boom for small businesses. According to Rohit Arora of Biz2Credit, a real small business now has about a 90% chance of getting a loan from a big bank.
So what’s the best way to take advantage?
Lon Gorman, an independent board member at Lightspeed Financial who has worked with NASDAQ OMX, NYFIX, and Charles Schwab weighed in, imploring small businesses to take act boldly.
“A lot of small businesses avoid applying for loans in the first place because of anxiety over the prospect of rejection. This is not a sound attitude for a small business to adopt during its growth period. It’s in a small business owners best interest to pursue financial funding avenues that make sense and assist the growth of the business without getting caught up in anxiety and misinformation.”
In addition to getting involved with a big bank, small businesses can also explore the many startups attempting to lick the once common challenge. Here is a list compiled by Forbes of some companies that have recently raised significant amounts of money to tackle small business financing.
- Fundation – Raised $2.7 million March 2013
- Dealstruck – Raised $1.2 million January 2014
- Bluevine – Raised $4 million March 2014
- FundBox – Raised $17.5 million April 2014
- Funding Circle – Raised $66 million July 2014
- OnDeck – Raised $77 million March 2014
- Fundera – Raised $3.4 million January 2014
- Kabbage – Raised $50 million May 2014
These companies are as much technology companies as they are finance companies and are all zeroing in on small businesses, which has been neglected by banks for decades.
A pretty good indication that the once headache-inducing challenge of getting a loan for small businesses is evaporating.
According to the Wall Street Journal, Some business owners have dug into their savings or retirement plans, turned to family and friends for funding or sought out costlier forms of funding.
Gorman vehemently warns against this type of risky behavior.
“Some small business owners are turning to personal financial streams in order to compensate for a general absence of credit. This can be a disastrous move: if small business owners take from their personal savings accounts or retirement funds to float a business that does not succeed, those individuals will be left not only without a line of credit for their businesses, but also without a financial lifeline regarding their personal finances. This is a costly mistake for small business owners to make.”
There’s no need to with the abundance of lending going on in the boom.
Several other strategies are also expected to increase small business funding: independent investors who finance small business loans, additional investment in small business loan providers, and investing in companies that benefit from small business successes.
Lon Gorman is an independent board member at Lightspeed Financial who has worked with NASDAQ OMX, NYFIX, and Charles Schwab. He currently serves as a financial guide for Lightspeed, including managing corporate credibility and standards, working as a watchdog, and advising on risk management. For more information, please see his LinkedIn: https://www.linkedin.com/in/longorman