How are you handling the economic news of the impending fiscal cliff, or the massive influx of freshly minted cash to U.S. banks? Does it make you want to hunker down, or expand your business plans for 2013?
If your plans include borrowing money, the internet has an abundance of advice on the topic, including some humor from “anonymous”: “You can always borrow from a pessimist; he never expects anything back.”
Facts to Consider about Loans
All humor aside, you may be intrigued to know some interesting things are happening in the lending world…
- …SBA’s (Small Business Association) loan programs posted the second highest dollar amount ever in FY 2012.
- …Banks have record high reserves and are becoming very interested in lending again. In fact, commercial loan officers in smaller community banks are in demand and have seen a 39% raise in pay since 2008.
- …The Federal Reserve’s economic stimulus plan is set to continue into 2013 (“Operation Twist”). Theoretically, this will goose the economy by making loans less expensive for home and car purchases and for funding projects.
Non-Traditional Lending Options
Nope. I am not talking about venture capitalists. FOXBusiness (Dec. 2012) featured two non-traditional lending options to consider with faster turnaround (and higher fees than banks or credit unions):
- Revenue-Based Financing (RBF). The borrower pays 3-5% of their revenue until the loan is paid off, rather than committing to a monthly payment amount.
- Factoring. The borrower sells their invoices to a third-party for a fee in order to have cash, before the customer pays, for needed supplies.
RBF or factoring may be the right solution if your business does not yet qualify for bank loans.
Is It Time to Raise Capital?
I am not an accountant nor a tax professional, so I am not advising you to run out and borrow money. Decide for yourself. Do these conditions make it a favorable time to grow your business?
- Non-traditional options like RBF or factoring may provide the bridge you need to grow your business.
- You can get an influx of funds by “going public” and selling stock in your business.
- Banks are eager to lend, and interest rates are low.
- Also, friends and family may want to invest in your small business. See Patriot Software’s FREE 10-page white paper titled “How to Raise Capital for Your Business” for a step-by-step guide to private lending.
Remember, since you are not the federal government, you will have to repay every penny that you borrow. So, don’t borrow unless you know you can pay it all back.
Now it is your turn. Do you have a loan success story or nightmare to share? Please comment with your stories, insights, and suggestions. And if you found this information useful, please tweet, like or share!