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Banks aren’t lending-despite reports the economy is getting better. So, what does this mean for small business owners and people trying to start their own business? Basically people are going to need to get a little creative when it comes to getting money from banks. If you don’t have a perfect credit score, you have some work cut out for you.
So why aren’t the banks lending? One reason is Congress won’t let them. The government gave banks money to bail them out, but told them not to repeat their mistake of giving loans to undesirable candidates. That seems reasonable, but it really is a vicious cycle. With the downturn in the economy, more people are losing their jobs, which means they aren’t making any money. Few businesses are hiring due to less spending etc. so people can’t find work. These people decide to start their own business, but can’t get a loan because they don’t have a job.
So what can you do as a business owner (new or already established) to get some capital for your business? One thing you can do is to look into business cash advances. These cash advances are given to businesses that sell a portion of their future profit in exchange for capital they will receive now. They are similar to payday loan companies–where you get a cash advance for your paycheck, but you end up paying a little more than you borrow.
Another thing you can do is work on your credit score. With a debt management program, you can work with your creditors to get out of debt and slowly restore your credit. Doing this will open the door hopefully for banks to start lending again.
Bank of America for example has promised to lend $5 billion to small businesses this year, which could start a domino effect for lending. If Bank of America can prove to other banks lending to small businesses aren’t as risky as they think they are, we could really be seeing some improvement in 2010.
I guess we will just have to wait and see what happens, but for now there are options out there for small business owners and entrepreneurs such as business cash advances as well as a debt resolution program. It might just take a little more creativity and thinking outside the box to get the capital you need.