Small Businesses Still Have Credit Woes

While it’s likely come as no surprise, and certainly to small business owners, a new report shows the increasing difficulties of those small businesses with trying secure financial products, such as small business loans. Now, though, new legislation could offset some of those difficulties. It’s no secret that small business owners are the strength of this country. They’re the ones who create new jobs and strengthen communities, yet they’re often the ones who struggle first in a tough economy and who struggle longest.

This legislation, if passed, could make it easier for these small businesses to gain lending from credit unions. The proposals, which are currently making the rounds in Congress, could allow credit unions around the nation to lend to small businesses as much as 27.5% of their assets. Remember, it’s currently at 12.25%; this could have a significant impact on these businesses who are in our communities around the nation. The best part? It could free up $13 billion in capital and create 140,000 jobs. Yes – 140 THOUSAND jobs.

Small businesses have historically faced a host of problems their bigger counterparts avoid. They often lack the deep pockets that bigger companies have as well as the global investors, lawyers and accountants.

Fewer Options

Of course, they struggle with employee turnover. Because they can rarely offer any of the benefits bigger companies have, they often find themselves finding and retraining employees throughout the year to replace those who’ve left for positions that offer health insurance, better pay and more benefits. It makes the hiring process a costly one as the costs associated with retraining employees – sometimes on a monthly basis – means it’s time away from the actual running of the business. With a less than ideal bottom line, securing bigger financing packages or even small loans can be challenging.

And speaking of financing, small businesses find themselves struggling with meeting payroll while also doing proper marketing, expanding facilities for easier growth efforts and expanding their product or service offerings. It’s often a matter of which needs are more dire at any particular moment: hiring help or using the money for a new advertising effort.

There’s not a single business owner who didn’t go into his effort without the belief that he could do it on his own if he had to. Within a year, though, most discover owning a business is anything but a sole venture. The failed businesses that weren’t successful because of improper time management and a refusal to seek outside help would fill volumes of books. It’s often a tunnel vision mindset that keeps small business owners from perspective that others see. It’s easy to lose sight of the priorities and it’s not surprising, then, that a small business owner finds himself with credit card debt and no access to other financial tools that can help manage that debt without compromising the integrity of his business.

Easier Days

It’s these reasons and more that an overhaul is needed and if current efforts are successful, it just might mean an easier time for these business owners around the nation.

The current restrictions on credit union business lending are anti-small business and anti-jobs. Simple regulatory relief for credit unions will create thousands of new jobs at no cost to taxpayers,

said Eli Lehrer, president of the R Street Institute and author of the paper.

Expanded credit union lending to small businesses is exactly the medicine the economy needs right now.

He explains that by far, the biggest problem for small business owners is a lack of available credit.

The Numbers

A full sixty percent of small business owners who were polled say they found time consuming difficulties when trying to access financial products needed to grow their businesses and hire new employees. More than half – fifty two percent – say credit cards are their sole financial tools, besides a traditional checking account, that they have. And they’re using these credit cards to buy computers, take out cash advances, cover utilities and even covering lunches and other off site business meetings. Still, they also agree – a full seventy five percent of the participants – that increasing credit unions’ member business lending cap to 27.5 percent is a much needed change. John Arensmeyer, who is founder and CEO of Small Business Majority, said,

Loans that will help small businesses grow and create jobs are harder and harder to come by. With banks’ lending portfolios shrinking and small businesses’ dependence on credit cards growing, lawmakers need to look for smart ways to revamp the credit landscape.

All eyes are on this new legislation with hopes that it’s just what’s needed to inject hope into a struggling economy.

It’s not likely to evolve into anything this year, especially considering the upcoming elections, which, by the way, could play a role in how this new legislation plays out. Ideally, though, by the time the new year rolls in, with it will come new hope for a stronger economy and stronger small businesses.

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