Whether small business owners want to obtain new lines of credit to expand their companies' operations or hopeful entrepreneurs want to start their efforts to create an enterprise from the ground up, tight lending conditions are likely keeping them from their goals.
Even as the economy generally continues to improve – though perhaps slower than many would want – banks are keeping credit tight for small business lending despite their efforts to expand it for other types of borrowing, according to a report from CNBC. As a consequence, many small business owners are now turning to alternative sources of credit as a means of boosting their finances and abilities to expand.
This includes alternative lenders which don't necessarily use credit ratings to determine the eligibility of loan applicants, including Yelp reviews, Better Business Bureau ratings, and payroll conditions, the report said. Others are relying on slightly more traditional lenders that might be a bit less restrictive than larger financial institutions with their financing opportunities, including small community banks.
A number of indicators for small business in general show that independent companies may be having a harder time than they should given other economic improvements, the report said. A number of studies show confidence among owners is certainly down, and new studies are starting to provide evidence that hiring efforts are likely being scaled back significantly as the financial difficulties being experienced by such companies lingers. This stands in stark contrast to the gains being experienced by large businesses, and data shows that even firms of middling size have been cutting back on both investment and job creation.
Moreover, experts believe that the federal budget cuts brought on by sequestration will continue to impact small businesses in particular, and this will likely be especially true of those that have government contracts, the report said. These issues could lead many companies to have massive cash flow issues in the near future, and the longer the uncertainty goes on, the worse off companies will generally be.
Small business owners need to carefully consider the ways in which ongoing economic issues will impact their companies specifically and determine what that will mean for their abilities to afford basic insurance policies like those for general liability insurance and workers' compensation insurance, both of which may come with growing costs.