Funding To Grow

A recent national survey found that 67% of U.S. small-business owners plan to pursue funding for their business in the next 12-months. This despite the obstacles high interest rates and stricter credit standards making it more difficult for all but the most profitable companies to obtain financing.

With the stock market betting the Federal Reserve will cut its interest rate later this year, should small business leaders wait to expand company borrowings? The answer is not simple.

Business loan by Nick Youngson CC BY-SA 3.0 Pix4free

First, small businesses need new loans from reputable lenders to finance products and services as the nation’s economy begins to expand. Delays in finding finance mean the small business has less time to prepare for the expanding sales situation. Depending on when it is recognized, a booming economy requires small companies to find the funds to grow with it.

Three years ago, when the interest rates charged by the Federal Reserve began to climb, many innovative business leaders locked in credit lines at rates, according to banking groups, which insulated them from the highest interest tariffs. Most of these agreements ran for two or three years and are due for review this year. According to these same banking advisors, the rates for renewal for even the highest-quality clients are less attractive. Many companies need more credit line extensions at almost twice the average percentage.

At the same time, banks and other financial institutions spend twice the usual time vetting new customers for corporate loans. Despite the desire for new customers expressed by banks, they are also rebuffing more of these new applicants than at any time in their history. Senior bank officials expect these two dynamics to remain the same later this year and into 2025.

Also, specific industry sectors or industrialists are finding it harder to obtain construction or other speculative loans routinely approved through short-term loans.

Dupaco Community Credit Union

The small business loan sectors also have a seasonality that works against waiting too long for this expected drop. The first and third quarters usually see peak demand for new loans, which likewise come due during these poor times. While this first quarter is not entirely over, early indications are that loan demand and extension requests are up.

Here are four things you can do to ensure that monies are there for you when needed.

               Strengthen your relationship with your current bank and reach out to other institutions.

                Add monies to your deposit history regularly.

                Have your accountant build pro forma balance and income statements to share with your banker.

                Build up a cash reserve in your bank and talk often and candidly with them about your operations.

In summary, act now so your business will have the funds to expand.

Tags: angel-investors, crowdfunding, finance, loans, personal-finance