It’s no secret the past two years have wrought havoc on the economy. Workers were laid off in droves. Small businesses suffered. Now, with things starting to get back on track, many displaced employees have found their own entrepreneurial spirit. As a result, they are looking to start their own business. In fact, it’s being dubbed “The Great Resignation,” and it’s going to turn small business lending on its head.
What’s Ahead for Business Lending
Many of these displaced employees are in the 30—45 age range. While some are looking for other employment, many are considering starting a business. Of course, this age range typically does not yet have a huge retirement plan, or a lot of savings at all for that matter. As a result, the demand for small business financing is going to increase greatly.
Whether you are ready to start a business or already own one, there are some things you need to know about small business lending in the new year.
Interest Rates Are On the Rise
Everyone is saying it, and they’re right. Sadly, interest rates are rising. Thankfully, throughout the pandemic the Fed kept the rate low. Obviously, it was an effort to counteract all the other crazy things happening in the economy. Now, it’s becoming obvious that a correction will be needed.
It’s time to pay the piper, and the Fed is considering rate hikes as early as this year. What does that mean for small business lending? If you need business funding, or think you may need it in the future, now’s the time to jump on a loan or a line of credit.
Inflation is Coming Fast and Furious
Here is another reason to make sure you secure funding as soon as possible. Inflation is imminent. In fact, according to comments made to CNBC by Fed President James Bullard, it’s coming sooner than expected:
“… we were expecting a good year, a good reopening. But this is a bigger year than we w
ere expecting, more inflation than we were expecting.”
It’s already started, and it always gets worse before it gets better. Make sure you have access to funds now, before it costs you more to get them. Then, when you start to feel the squeeze of inflation, you have what you need.
Regulations Aren’t Likely to Change Much
Even though small business funding options are increasing, it’s not likely the industry will see tighter regulations soon. Business owners will still have to find their own reliable and affordable funding.
This is where the services of one of the business credit specialists at Credit Suite can be especially helpful. These specialists have their finger on the pulse of the small business lending industry. They can help borrowers make informed decisions based on that knowledge.
The SBA Will Likely Play a Much Smaller Role
The Small Business Administration has had a tough couple of years as well. This is due mostly to the fiasco that ensued with the Paycheck Protection Program. A good idea that must be rushed is virtually guaranteed to have problems. The SBA was directly in the line of fire.
They are working to rectify it, but their role in small business lending will likely be smaller in 2022 than it has been in the past.
Online Lenders Aren’t Going Anywhere
Not only are online lenders sticking around, but they will continue to offer more options as their role in business lending continues to grow.
The demand for business funding services that are less stringent when it comes to approval processes is stronger than ever. There are plenty of alternative small business lenders standing ready to fill the gap.
According to the 2019 Small Business Credit Survey 32% of small business applicants used online lenders, and that was before the pandemic. That number is very likely to grow in the coming year for a number of reasons. First, online lenders are typically more flexible. Also, they tend to offer a wider range of funding solutions, including:
- Business loans
- Lines of credit
- Merchant cash advances
- Invoice financing, and more
Furthermore, they are usually faster and more efficient. Not only do borrowers get faster approval, but they typically gain access to funds faster as well. Not to mention, you can apply for funding with just a few taps on a keyboard.
It’s likely that this year and in the years to come, online lenders and other fintech companies will continue to provide lending solutions to small businesses.
Online Lender Examples
There are a lot of well established online lenders out there, and new ones are popping up everyday. Be sure to vet each one carefully, and double check details before you apply, because they can change often. We have reviews on a number of them to help.
Here are a few you can start with:
With all of these choices, we highly recommend that you check their websites directly for the most recent qualifying and term details, as these can change over time.
Credit Line Hybrid
If you need more of an alternative loan option rather than an alternative lender, a credit line hybrid may be a good option. This is a form of unsecured funding, and the Credit Suite Credit Line Hybrid has an even better interest rate than a secured loan. In fact, it can sometimes be as low as 0% for the first few months.
It’s a credit card stacking program, and many of the cards report to business CRAs. That means, you can build business credit and access cash for your business with no personal guarantee.
You do need a good credit score, or a guarantor with good credit, to get an approval. The minimum FICO is 680. There are no financials required, and you can often get up to $150,000. It is important to note also, some cards may report on your personal credit.
Fundability, Including Business Credit, Will Be As Important as Ever
With increasing demand and competition for all types of business lending, building strong fundability will be increasingly important. Part of strong fundability is having a good business credit score. There are many ways to build your business credit score.
You need help from someone with inside knowledge of the industry and relationships with the vendors and lenders that can help you build your business credit. This makes the whole process go faster and keeps frustration to a minimum. A free consultation with a Credit Suite Business Credit Specialist is a great place to start.
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