You do not have to be a rocket scientist to know that the U.S. economy has seen better days. In fact, much of the world can say the same about their own respective economies.
As unemployment continues to hover around 9.1 percent, millions remain on the unemployment lines or have even given up hopes of finding work, many small business owners are looking on in fear that they may have to close up shop should they not be able to get necessary loans to keep their businesses afloat.
Whether the small business loan is needed to open a business, make necessary repairs to a business, grow the business, etc. the challenged economy certainly presents major challenges for small business owners who are oftentimes hearing 'no' when requesting loans.
If your small business is in need of financial help, there are several avenues to turn to. Among them are:
- Securities-Based Lending -- With this option, small business owners typically borrow funds from their own assets or from a partner or partners. This is money that typically accrued over time and can be a reserve fund for when times are tough;
- Those Close to Home -- Many business owners will turn to a family member and/or close friend if more money is required for their business. Be careful, while you have a good relationship with this individual, it can quickly sour if terms of the loan are not clearly spelled out. Should you choose to borrow from someone close to you, make sure there is a clear understanding on how much, when the money will be paid back, and if there is any interest and so on. In the event it is done on just a hand shake, there could be problems in the near future;
- Trade Credit -- Another option is where one small business owner says yes to offer goods and/or services to another business through credit, agreeing that it will be paid back in the future. Keep in mind that you again want everything in writing so there are no unpleasant surprises down the road;
- Factoring -- With this choice, the small business owner receives cash for their accounts receivable. There is no added debt formed with factoring, however it can prove quite costly. In some cases, factors are known to charge up to 20 or 30 percent interest;
- Traditional Banks -- Although many banks are not in the loan giving mood these days, there are some out there where you can still score a good loan rate. Remember, you will need a good credit rating and a fair amount of collateral in order to try this approach;
- Credit Cards -- Lastly, there is always the old standby credit card. In the event you use this to fund projects with your small business, be sure you can meet the monthly balances, as the last thing you want is racking up a large amount of credit card debt.
As a small business owner, you were smart enough to put a business plan together and realize your dream. Now that financial times are a little tough, don't make a mistake that could end up going from small to big.
So, as a small business owner, are you feeling the pinch in today's economy?
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