Finance Options for Small Businesses in a Tight Credit Market

Finance Options for Small Businesses in a Tight Credit Market

Today's lending environment poses many challenges especially to small business loans owner. Just a few short years ago, many small business owners were flush with cash and revenues seemed to be steadily increasing. As a result of good cash flows, many business owners neglected their banking relationships and selected to self finance capital acquisitions in lieu of debt. Unfortunately, with the downturn in economic activity this decision has left many business owners asset rich and cash poor.

For those business owners that have weathered the storm, sales remain contracted and many companies are having to manage operations with substantial decreases in cash flow. For this reason, many business owners have sought out their primary bank for a working capital cash injection only to find that their primary banker is not lending. For those seeking to finance a specific project or piece of equipment, the answer is often the same; put simply, banks are not lending to anyone but the most credit worthy of customers and any company with a contraction in sales is considered high risk.

After several turn downs from their local banks, business owners are left with few choices. Fortunately, a second tier of lenders exists to serve the needs of small and medium size businesses. These lenders are often private portfolios that cater to specific industries and specific types of lending products for businesses that greatly affect their business lines of credit. Furthermore, this second tier of lending solutions is constantly changing with new participants putting out their shingle and old participants shifting their product offerings to meet the demands of the current business borrower. Many of these 2nd tier lenders will say yes when the banks say no; however, finding and navigating the maze of 2nd tier lenders can be time consuming and unsuccessful without having some guidance and understanding of the process.

Some of the options available in today's tight credit market include both short and medium term financing vehicles beginning with working capital facilities that pay out over 6-9-12 months or equipment leases structured over 36-60 month terms for new equipment purchases. Some providers will finance soft costs, many will not. Some providers will lend against average bank balances and/or credit card receivables and others will only lend against certain types of qualified receivables. Occasionally, a new product offering will emerge that is both competitively priced and structured for many businesses to qualify for. The challenge is knowing where to go with what type of request so as not to waste time and money fishing at the wrong pond.

For this reason, prudent business owners will often retain the services of a consultant or broker to help them obtain the financing they need to run their business. At Direct Business Lending, we work with hundreds of 2nd tier private lenders so you can focus on running your business while we secure the financing that your banks won't do. Let's face it, there simply is not enough time in the day for the typical business owner to do everything that needs to be done, let alone get a handle on the 2nd tier of lenders out there. At Direct Business Lending, we offer up solutions when the banks say no.

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