Alternative Sources of Funding Available As Banks Tighten Lending to Small Business
It's Just a Matter of Knowing Where to Look, Say Small Business Experts at BUZGate.org
April, 2008 | Exeter, NH - As the nation's economic downturn continues, small businesses are finding it increasingly difficult to borrow money from conventional lending institutions, threatening their ability to grow and in many cases, survive. Still, there are many alternative funding sources out there, say experts at buzgate.org, the nation's leading resource and referral network for small business.
A recent study by the National Small Business Association (NSBA) indicates that more than half of business owners polled have had difficulty securing credit over the last few months. The Federal Reserve has also reported that one-third of U.S. banks have tightened their standards for lending to small business. The problem is even more acute in light of the fact that more than half of small businesses rely on some type of business loan, according the NSBA study.
"While the credit crunch is indeed a serious concern for small business, there are still plentiful financing opportunities available," says Deborah Osgood, cofounder and Chief Knowledge Officer at buzgate.org. "It's just a matter of doing your homework and taking advantage of the many resources that do exist. When banks say no, there is still hope for small businesses."
In fact, Osgood says that an economic downturn could even be the right time to launch a new business, as business assistance programs beef up to support business creation and growth.
buzgate's no-cost, web-based portal lists literally thousands of business assistance programs and sources of alternative funding for small businesses. Federally guaranteed loans by the Small Business Administration remain plentiful, as do loans for women, veteran and minority-owned businesses. Many state and regional economic development organizations provide specialized financing as alternative sources of capital to small business. Microloans, those under $35,000, are also becoming increasingly popular.
Osgood adds that there are also many ways for businesses to take advantage of funding mechanisms that do not require a bank loan. For instance, retail businesses can allocate a future portion of credit card sales to receive immediate working capital. Factoring is another way to finance growth without borrowing by enabling a small business to sell its invoices to a third party at a discount, in return for immediate cash flow.
"While identifying financing options may require more effort and creativity during a time of economic uncertainty than simply going to your local bank for a traditional business loan, small business owners need to know that such opportunities exist," concludes Osgood.
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buzgate.org (the Business Utility Zone Gateway) is a public/private initiative that serves as a resource and referral network for the nation's millions of small businesses. buzgate.org was created by William and Deborah Osgood, founders of the Knowledge Institute, and recognized leaders in small business development and education. buzgate.org resources are available to users at no cost. The site is fully supported by private sponsorships. Last year, more than 2 million users turned to buzgate.org for advice and guidance. Visit www.buzgate.org for more information.