The Small Business Dillemma
One thing that Hurricane Sandy and other recent natural disasters have taught us, when problems arise, Americans come together to help each other out. Instead of relying on government as the savior, they open both wallets and hearts to do what is right by their neighbor. Oddly enough, what is done by individuals may also be done by corporations and industry conglomerates.
Recent natural disasters did much to remove people from their homes, and shutter numerous businesses both small and large, companies that simply lacked the financial ability to dig out from under the hole that had been dug for them. Banks turned out some of the largest companies in the country. Small business loans plummeted $56 billion from their June 2008 peak of $33 billion.
Is there a silver lining here? Yes, there is. In recent years, there has been an explosion of alternative lending options for small business owners to take advantage of. New programs such as merchant cash advances have become the new normal for many business owners across the country. Interest levels may be quite high, but it is a minor miracle that the money is there for them to obtain in the first place.
Private industry has also been a driving force in the aftermath of the banking crisis, creating new business models and new opportunities, and with prominent banks providing much needed capital that can in turn be lent to small businesses.
Some are decrying the process, saying that it is robbery for a small business to pay exorbitantly high interest rates, however with the option being to close up for good, the choice becomes clear. Banks are able to borrow money for next to nothing, however small businesses cannot. Banks do lend to small businesses with excellent credit and plenty of collateral and cash flow, and often with rates as low as 4%. On the other side of the coin, many small businesses do not have these luxuries, and end up turning to alternative lenders in order to get the capital they so desperately need.
The Alternative Solution
Is there a way to make access to capital easier for the biggest number of small businesses?
Many of these lending companies are backed by hedge funds and venture capitalists, and have come up with an excellent formula for underwriting loans based on bank statement and the daily withdrawals from bank accounts. This is a much more streamlined process than applying for a regular Small Business Administration loan. Many of these applicants can receive a cash advance in as little as 48 hours.
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