Why aren’t they getting them?
We’ve all seen the news and reports on how the “credit crunch,” as we so delicately call it, is preventing business owners with good credit from obtaining financing. But why is it so hard? Without even addressing the disappearing role of community banks in the vitality of small businesses, the simple answer is that many of these business owners don’t have the resources or the time to “hurry up and wait.” That is to say, the traditional lenders that are left standing want financial statements, lengthy business plans, personal collateral, and a litany of other performance guarantees…and even if a business owner does have the luxury of dedicating enough resources to pull all of this together, they then find themselves waiting 90-120 days before their loan is funded.
In the meantime, that small business could be purchasing more inventory and new equipment. They could be creating jobs, working on product upgrades and physically expanding. Instead, that business, clearly in need of operating capital (hence the loan request in the first place), is stagnant, possibly losing revenue, or worse. This economic climate has certainly made small business owners more street smart. They want to buy more inventory because they know that purchasing more means cost per item savings. The list of extras that the business can go without is growing, and they’re ditching the old adage of “build it and they will come” for a hard nosed, cautious approach to expansion remodeling and hiring.
And it’s that fear of hiring that’s the most ironic aspect of these small businesses having trouble getting loans. According to Fed Chairman Ben Bernanke, small businesses employ roughly half of Americans, and account for 60% of new jobs. So what’s a small business to do? If you hire new employees, you risk an overhead increase you may not be able to afford (or sustain) and if you try to get a loan to support new hires and business expansion, you find yourself spending precious energy on a near impossible task. The backbone of the economy needs void fillers, which is where we come in.
Our mission at IOU Financial is to help small businesses by providing them with the necessary capital they need to strengthen their operations and focus on growth. To put a finer point on it, we’re looking to help small businesses help themselves by allowing them to use the strength of their cash flows to borrow money. It comes down to a need for reasonable requirements for loan fulfillment, faster financing at affordable rates, and a process that’s more organically suited to the day to day operations of a small business.