In the current financial climate, bank loans are difficult to secure and as a result, many business owners are starting to use similar tactics to those being used by consumers across the country by putting off non-priority expenses, reducing debts and getting creative when it comes to bringing in additional funds.
Since the start of the recession, businesses have found it more and more difficult to qualify for bank loans which often results in them not being able to expand.
As the economy worsened further, banks were increasingly fussy about who they would lend too as they needed to be sure that borrowers were going to be able to repay the money.
Today, there are more signs that banks are ready to start loosening the purse strings. However, business owners are still finding it hard to get approved for loans.
As a result, business owners are having to rethink their strategies. Some of the steps being taken by small businesses include:
- Paying Off Bills More Slowly – According to a report by Experian in October of this year, businesses of all sizes have increased the length of their late payments to 7.1 days, an increase of 16 percent. For large companies with more than 1000 employees, this is actually a 28 percent increase.
- Finding Alternative Funding – banks have always played a large part in the growth of businesses. However, since the recession, more small business owners are being forced to turn to friends and family for funding because they no longer qualify for bank loans. A survey carried out by the National Small Business Association showed that 21 percent of small business owners said that they took out private loans. This is a rise of 12 percent from August 2008, just before the recession hit.
- Reducing Debt – American consumers have been working to reduce the amount of debt they are carrying, and businesses are also following suit. Small business adviser Mike Periu said, “There’s more of emphasis on eliminating old debt as opposed to borrowing more to grow.”
- Paying Off Credit Card Debt – Businesses become a safer credit card risk when they begin to pay off debts, especially revolving debts like credit cards.
All of these steps combined can help businesses to improve their financial standing and provide an opportunity to grow and expand. This in turn brings in more money, helping to keep the business in the black.