Alternative lending growing as small business owners worry about access to capital

Jessica SarterSmall Business Lending

Small business lending has experienced turbulence in recent years, as federal agencies and lending institutions try to stabilize the sector through meeting all of the needs of borrowers. However, as the economy has shown signs of life this year, the needs of small business owners have grown substantially, leading many to fear that there will be a shortage of access to capital.

While many government programs have expanded to meet these increased needs, some have opposed their efficacy and sustainability. For example, the U.S. Small Business Administration has increased its standards related to size to reach more companies, but many experts have said that this could work against the small businesses most in need of capital.

Access to capital worries small business owners
The Wall Street Journal recently reported that a large portion of the small business community has serious concerns about access to capital in the coming financial quarters. According to the news provider, recent programs meant to stimulate loan disbursement volumes have either not done enough yet, or will begin to expire in the coming months.

The source noted a study from the Federal Deposit Insurance Corporation that found small business loans have been shrinking since 2009, with June’s figures dropping from $607.6 billion to $587.9 billion. The economy, while bouncing back on many levels such as consumer spending and credit ratings, has been too sluggish for many business owners.

“The economy is not growing fast enough for small businesses to increase sales and show the cash flow they need to qualify for additional credit,” Tom Duryea of the Summit State Bank in California explained to the Journal.

Access to capital is the most important factor in small business success, as companies cannot carry out operations or expand their firms without adequate financing. However, alternative lending options have seemed to catch on in popularity among the nation’s small businesses in recent years.

SCORE explains alternative resources for capital
Naples News recently interviewed Gray Poehler of SCORE regarding the options small business owners have when traditional channels of lending come up short. According to Poehler, there is no shortage of alternative finance options for small business owners to take advantage of.

He recommended seeking out venture capital groups, angel investors and other investment groups, as these channels have increased their loan disbursement volumes in the years following the Great Recession. Further, these resources can sometimes be more feasible for startup companies that do not have a proven track record of success.

BoeFly is an invaluable resource for small business owners, especially in times of heavy lending competition. This firm has thousands of participating lenders, and uses complex algorithms to match financial institutions to borrowers in the most efficient process possible. Small business owners only need to fill out one loan application to gain visibility with all of these lenders, strengthening the chances of success.