The Reality of Access to Capital for Businesses

By Karlene Sinclair-Robinson

Financing a business today is not easy. Whether you have a small or large business, you are effected in some way or other. It is very true that many entrepreneurs today are leery and weary when it comes seeking access to capital. This is due, in part, to lenders increased aversion to risk. A few years ago, the risk tolerance bar was not as high as it is today. Unfortunately, many cannot pass the new risk test as the bar has moved to a higher level.

With so many business owners being denied financing, entrepreneurs who might have considered this route are now impeded by the rationale that they will be turned down, too. This is not necessarily true but, when the facts illustrate decreased lending, many business owners decide to stay away.

In addition, the slow growth of the economy, and with the threat of the “Fiscal Curb or Cliff”, now the called the ‘Sequester’ looming on the horizon again, many entrepreneurs are unwilling to venture into the financing arena. When uncertainty is the ruling order of the day, businesses, employees and consumers will feel the pinch. When revenues are on the decline, business owners are not necessarily comfortable seeking capital. How can they pay it back when they are not generating enough cash flow to cover their current expenses?

The fact that good credit is also a mandatory requirement to accessing traditional financing, otherwise called bank financing, some entrepreneurs realize they will not qualify. They figure it will be a waste of their time. This trend of not borrowing is also impacted by the business owner’s ability to pay their personal household debt; they might have health issues or a sick spouse, or a host of other issues. Acknowledging the issues impacting your business and addressing them today will make a difference.

Alternative Financing Solutions

There are alternative financing solutions that might be a better fit. There are a variety of financing solutions that can provide the necessarily liquidity needed or increased cash flow necessary to move your business in the right direction.

Use the following questions to evaluate your business’ ability to secure non-traditional or alternative financing:

  1. Who are your clients? (Government, Businesses, Consumers)
  2. Are your clients creditworthy?
  3. Do you invoice your clients for goods or services rendered?
  4. Do you allow your clients to pay you via credit cards?
  5. Do you provide goods or services?
  6. What industry do you operate in?
  7. Do you give your clients payment terms?

The above questions are just a few that can help define what alternative financing you and your business qualify for. Based on your answers, you could qualify for such financing options as Factoring, Equipment Financing, Micro-loans, Purchase Order Financing, Credit Lines or Peer-to-Peer Lending.  Use these solutions to expand and grow your business.