Loans for Business: From Private Equity to Traditional Lending, the Outlook is Grim

Despite the signs of an economy attempting to pull itself out of the mire, loans for business just aren’t materializing as you might expect. Traditional lenders are a literal no-show and private equity is in a virtual deep freeze. Setbacks like these have small businesses looking internally for capital.

A quick look at the numbers says it all. USA Today reports that the National Small Business Association has revealed 42 percent of small-business owners aren’t getting the loans for business they need to become competitive--or even remain stable. The worst news is that the figure is up from 33 percent just last December. These statistics seemingly fly in the face of proposed economic stimulus packages.

The news from GOP USA is similarly bleak. The government was left holding $2.1 billion in write-offs of small business loans it had guaranteed last year. That’s a new record and one that has sent the process of acquiring loans for business is a continually downward spiral. The Small Business Administration purchased $2.1 billion in bad business loans that have placed a strain on the SBA’s ability to offer better financing vehicles.

With respect to the noticeable absence of private equity--such as venture capital, business angel capital, management buy-ins, management buy-outs, and mezzanine arrangements--small business owners must consider in-house financing opportunities. These include merchant cash advances and equipment leasing. Those businesses that can capitalize on inside resources have a distinct advantage in a challenging economy.