Small business borrowing will be a lot different in 2025

Category: Small Business Borrowing
Published: Tuesday, 24 March 2015
Written by Admin

One of the interesting business trends to have witnessed going back a decade is how small business owners have chosen a loan source. But the future trend should be even more interesting.



The Future of Small Business Borrowing

Category: Small Business Borrowing
Published: Saturday, 21 March 2015
Written by Admin

One of the interesting business trends to have witnessed going back a decade is how small business owners have chosen a loan source. But the future trend should be even more interesting.

Looking back, there have been primarily three sources of loan funds for growing small businesses:

1.#160;#160; Large, multi-state banks

2.#160;#160; Community banks, locally owned and managed

3.#160;#160; Credit unions, also locally determined

In a recent online poll we asked small business owners about their borrowing preference. One-sixth of our respondents chose “large bank,” which is down from a decade ago. Following the 2008 financial crisis large banks stopped lending to small business while they struggled with their own regulatory stress test. They’re lending to small businesses again, but are now in catch-up mode.

One-eighth of our sample selected “credit union,” which is higher than the past. Much to the chagrin of banks, credit unions have expanded their customer profiles to include small businesses, aren’t taxed like banks, and aren’t subject to community reinvestment requirements. I predict the credit union loan option will grow for small businesses going forward.

More than two-thirds of our small business audience told us they borrow from community banks. The Independent Community Bankers of America (ICBA) report they make almost 6 of 10 small business loans nationally, so our folks are a little more active with these lenders. Perhaps, since I’ve long espoused the natural symbiosis between Main Street businesses and community banks, I’ve influenced my polling audience to move this needle beyond the national average.

The big news of our poll is that crowdfunding popped up on the lending radar for the first time. The number was only 3%, but this credit source is very new. (This publication should have the three articles I’ve written on crowdfunding.)

Right now crowdfunding loans fit small businesses that aren’t bankable for one reason or another, but are strong enough to handle the associated higher interest rates. I predict over the next decade crowdfunding will claim a larger piece of the small business loan pie for three reasons:

1. Crowdfunding rates will become more competitive

2. It won’t have banking regulatory challenges

3. The virtual, online aspect of crowdfunding will appeal to the next generation of entrepreneurs

Recently I attended a convention of bankers and asked several of them what they knew about crowdfunding. Most had not heard the term, only a couple of those who had heard of crowdfunding knew how it worked and none understood the future implications to their industry.

Bankers, call your office.

Write this on a rock …#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;#160;

Small business borrowing will be a lot different in 2025.

Jim Blasingame is the author of the award-winning new book, “The Age of the Customer®: Prepare for the Moment of Relevance” www.AgeoftheCustomer.com . Jim is one of the world’s leading experts on small business and entrepreneurship, and founder and president of Small Business Network, Inc. www.SmallBusinessAdvocate.com. He’s the founder and host of the syndicated weekday radio program, “The Small Business Advocate® Show,” where for more than 17 years he has conducted over 1,000 live interviews annually with his “Brain Trust,” the largest community of small business experts in the world.

Â2015 Small Business Network, Inc.#160;



First Global goes after SME borrowers, willing to overlook accounts

Category: Small Business Borrowing
Published: Saturday, 14 March 2015
Written by Admin

First Global Bank (FGB) Limited has set up a commercial unit to deal exclusively with the financing needs of small businesses.

The bank is targeting the information technology, agro-processing, tourism and energy firms, but Assistant Manager for Credit Deidre OConnor-Heron says First Global is also open to funding projects in any industry.

First Global is the latest commercial bank to take more specific aim at the SME sector and is doing so at a time when lending to large firms is falling, while small and micro borrowing continues to show vibrancy.

In the last quarter surveyed by the central bank, small business borrowing represented 37 per cent of all loans in the period ending September 2014, up from 28 per cent in the June quarter.

First Global Bank manages a loan portfolio of $16 billion amid total assets of $40 billion at September 2014, according to industry data on commercial banks. The bank, which is a subsidiary of conglomerate GraceKennedy Limited, is No. 5 of six commercial banks, with just four per cent of a loan market that was last valued at $367 billion.

First Global has been advertising its new loans for small businesses, noting that it will not demand audited statements as a condition for considering loans.

OConnor-Heron stated that the banks new targets are those businesses with six to 20 employees and annual turnover of $10 million to $50 million.

For this segment, she said, First Globals rivals not only include other commercial banks, but also credit unions and other lending agencies. Loan rates will depend on the risk associated with the lending as well as the adequacy of the collateral provided, but will be competitive, she added.

First Global plans to make inroads, the officer indicated, through the technology for which the bank is widely known, specifically our groundbreaking online banking solution, Global Access, which allows our clients to transfer funds to any account housed in any bank, locally and internationally, she said.

OConnor-Heron also said the bank is developing products specifically positioned to meet the needs of the segment. She did not specify what these were.

FGB recognises and appreciates the challenges faced by SMEs and, as a consequence, we have taken the decision to find ways to meet them at their point of need through operating flexibly, given the significance of this sector, the spokeswoman said.

The non-requirement of audited financial statements is one such measure, though OConnor-Heron also indicated that the bank will encourage loan prospects to progress to better accounting practices.

We acknowledge the importance of information, which includes the audited financial statements, to the SME for growth and development and, hence, always encourage them to become compliant within 12 months, she said.

Commenting on the risk posed by First Globals approach to the SME market, OConnor-Heron said risk is inherent in any business transaction but added that the banks credit risk assessment is and will remain robust to identify key risks in lending to this segment and will seek to mitigate appropriately.

The bank will accept both traditional and non-traditional assets as collateral for loans, she added, while noting that the bank was weighing the potential within the new National Security Interest in Personal Property (NSIPP) registry.

We are currently exploring all the opportunities that SIPP offers and this has afforded us the ability to consider non-traditional assets, she said.

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U.S. small-business borrowing down in January: PayNet

Category: Small Business Borrowing
Published: Thursday, 12 March 2015
Written by Admin

(Reuters) - US small businesses pared borrowing in January after a record prior month, according to data released on Tuesday.

The Thomson Reuters/PayNet Small Business Lending Index fell to 120.9 from an upwardly revised December reading of 133.5, the highest since the indexs launch in January 2005.

From a year earlier, the index was up 3 percent, suggesting the US economy is still on track with continued expansion, PayNet founder Bill Phelan said.

Extreme cold muted business investment, he said, and businesses at the beginning of the year were also still digesting the large investments they made in the previous year.

The index has historically tracked US gross domestic product growth two to five months ahead.

Loan delinquencies ticked up to 1.54 percent, separate PayNet data showed, a sign that, despite the overall increase in borrowing in 2014, businesses are for the most part repaying what they owe.

PayNet collects real-time loan information such as originations and delinquencies from more than 250 leading US lenders.

(Reporting by Ann Saphir. Editing by Andre Grenon)