Lingering Small Business Credit Crunch

Did anyone see the Wall Street Journal article: A Credit Crunch That Lingers earlier this week?

The reporter, Emily Maltby, wrote that even though the economy us “on the mend,” small business entrepreneurs are still struggling to land credit. She went on to discuss the myriad of explanations:

  1. Most of the government programs created to address the problem have been focusing primarily on Small Business Administration loans, which amount to just 10% of all small business lending.
  2. Some bankers claim that loan volumes are dwindling because the demand is down. These bankers say that business owners aren’t willing to take on more debt during these difficult times.
  3. Other bankers blame federal regulators for insisting that banks to be more prudent with lending.

Entrepreneurs are stuck in the middle of the finger-pointing debate with limited or no access to cash. Many of these small business owners are being forced to curtail their growth and hiring, which in turn, is slowing the nation’s recovery and keeping unemployment high.

The article highlighted Julio Valencia’s business, JTI Landing Systems because his somewhat new business has been turned down four times by larger banks. Exhausting his personal cash and retirement savings, Mr. Valencia struggles with cash flow, though not because of poor money management. Rather, his cash flow problems stem from slower-paying customers.

PRN Funding’s Take: Mr. Valencia and other small business owners who are struggling with poor cash flow should look into accounts receivable factoring as a lucrative alternative financing option.

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