If you’re an American entrepreneur with more than a year or two under your belt, you’ve already experienced drastic economic changes. In fact, the last 10-12 years have been a roller coaster ride that many business owners either wanted to - or were forced to - get off when it changed from fun and exhilarating to sickening.
Fortunately, in most sectors, things have slowed down in the last 1-2 years and have hit a steadier equilibrium that’s allowed for consistent, steady growth for many companies. But those companies are being run far differently now than they were in the late 90’s or early 2000’s. It’s a different world with a different frame of reference when it comes to risk and reward.
So, the thought of buying another business still gives some entrepreneurs cold sweats now when it would have been a thrilling concept years before. But is it possible that 2017 is actually going to be the best year in a decade to buy a business in the United States?
There’s at least one very good reason to believe it is.
Historic funding opportunities
In late 2015, the Wall Street Journal reported:
- Together, 10 of the largest banks issuing small loans to business lent $44.7 billion in 2014, down 38 percent from a peak of $72.5 billion in 2006, according to an analysis of the banks’ federal regulatory filings.
- Through August, banks this year originated 43 percent of business loans of up to $1 million, down from 58% for all of 2009, according to PayNet Inc., a tracker of small business credit.
- Nonbank lenders increased their market share to 26 percent from 10 percent, with corporations that lend to their business customers or suppliers making up the balance.
However, just a few months later, large banks were right back into the swing of things. For example, in January of 2016, Citibank released a press release containing this powerful stat:
- Citi's pace of small business lending in 2015 ($10.0 billion) surpassed that of 2009 ($4.5 billion) by more than 120 percent.
Depending on your business strategy, industry, location, and other factors, there are more reliable and willing funding opportunities available to entrepreneurs right now than ever before. Between low-interest traditional business loans, government grants and loans, and a striking volume of venture capital available from individual angel investors, large corporations, and established VC funds, it’s easier and faster than ever before to fund a promising new startup or the expansion of an existing business.
As opposed to the relative risk of a brand new startup, obtaining funds to purchase an already established and successful business is even easier. This is doubly true if you’re purchasing another business that naturally extends or expands your own existing company or expertise since you can likely prove to the lender you’re up to the task of making the acquisition profitable.
This climate can’t last forever
If there’s one thing the Great Recession taught us all, it’s that nothing good lasts forever. There’s bound to be a point at which the Fed finally decides to start raising interest rates, where both banks and alternative lenders will begin focusing more on collecting than on lending. And after the dramatic hit, the economy took in 2008, you can bet that decision makers are going to be much faster to batten down the hatches and prepare to ride out another storm rather than get caught unprepared yet again.
So, while the economic climate is still favorable for small business lending, why not explore the option of buying an existing business or franchise location early in 2017? Use it as an opportunity to expand your current operations or to finally take that step into business ownership you’ve been dreaming of for years.
Then if things start to change going forward, you’ll be in a better position of control and more likely to ride out the storm yourself.
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