WASHINGTON – Small businesses are the backbone of the American economy and have been pivotal in bringing the United States out of the Great Recession. Since 2009, small businesses have been responsible for creating over 60% of net new jobs in this country. There is perhaps nothing quite as American as the hard-working small business owner pouring their life into their enterprise.
Important as they are to our nation’s growth, however, small businesses and their owners are facing more challenges than ever. The Small Business American Dream Gap Report examined today’s economic landscape compared to a year ago and found that despite the overall positive outlook for small businesses, many of them are facing significant obstacles. Key findings from the report are below.
- Nearly 3 out of 10 small businesses reported finding it harder than in the past to reduce operating costs.
- 25% of small businesses found it harder to plan for unforeseen expenses.
- 20% of small businesses said they had considered shutting down, primarily because of lack of growth or cashflow issues.
Perhaps underlying all of these concerns is the challenge small business face when obtaining bank financing. When most small businesses need a loan fast, their bank’s answer is more often than not a resounding “No”– sometimes without any reason and oftentimes after a long time waiting for an answer.
Why do the banks say no?
Banks are focused on the borrowing business’s credit score and the owner’s personal creditworthiness more than on how the business will utilize the loan to help them thrive. In other words, the traditional bank focuses more on the past than on the future. And not only that, but because it costs a bank just as much to underwrite a $2 million loan as it does a $300,000 loan, many banks consider even successful small businesses too expensive and risky to underwrite, leaving many business owners scrambling for cash to cover things like payroll or inventory at the most inconvenient times.
Many banks consider even successful small businesses too expensive and risky to underwrite, which leaves many small business owners scrambling for cash to cover things like payroll or inventory at the most inconvenient times.
“I’ve been in the equipment manufacturing business for 20 years,” said Teddy Knowles, owner of Republic Machines in Lincoln, Nebraska. “I have a reputation in our community. We took a hit a few years back when no one was building, but since then we have been closing one contract after another. And that’s the problem. A lot of our business is from large contracts, and we often aren’t paid on them for months.”
Terrence and Josh Marek sit amidst their equipment in Wharton County, TX
“Over the summer I needed cash to cover inventory, and the bank I’ve used for over 15 years couldn’t help me. I was stunned. I thought that we had built a relationship over the years, but I was wrong. So I took my business elsewhere.”
“Over the summer I needed cash to cover inventory, and the bank I’ve used for over 15 years couldn’t help me…So I took my business elsewhere.”
Teddy realized that if his business was going to keep pace with growth, it would need to find other lending options. From other small business owners he had heard about “superbrokers” providing alternative financing solutions and decided to do his research.
Superbrokers fill the gap.
“I had never heard about superbrokers before, and I was suspicious. But after doing my research and talking to other business owners, I decided to give one a call. My $300,000 line was funded in two days. My superbroker worked for me to connect me with a lender that fit my criteria rather than the other way around. That’s a whole lot different than my bank, who didn’t move a finger to budge from their pre-set ‘lending standards’ and dragged their feet for weeks.”
“My $300,000 line was funded in two days. My superbroker worked for me to connect me with a lender that fit my criteria rather than the other way around. That’s a whole lot different than my bank, who didn’t move a finger to budge from their pre-set ‘lending standards’ and dragged their feet for weeks.”
So who are these superbrokers?
Superbrokers are companies that fill the gap between a small business like Teddy’s in Nebraska and lenders across the country. At first, Teddy’s lending network was limited to his bank and a few other local lenders. However, by establishing a relationship with a superbroker, Teddy was able to compare options from across the country to find the one that suited his business’ needs the best.
Like small businesses, superbrokers build their business on relationships. In this case, their relationships are with hundreds or in some cases thousands of nationwide lenders who have different lending criteria than banks do. And because their criteria are different, they are willing to lend to borrowers that are outside the scope of most banks’ lending criteria. Some of these lenders even focus on specific industries or specific business needs.
Established superbrokers find the right lender for you.
The Globe interviewed Director Tom Spencer with U.S. Business Credit Lines, one of the most established superbrokers in the United States today. Tom shared with us his over 16 years’ experience working with thousands of small business owners with their business financing needs.
“Passionate business owners are constantly dealing with the daily stresses of running their business. Whether due to economic uncertainty, unexpected challenges, or simply growth opportunities, there are countless occasions for which additional capital is a real need. And time after time, we hear how our clients’ banks have let them down. So that’s where we step in. Having done over 20,000 business fundings in a vast array of industries over the past 16 years, we connect business owners with the lender that best suits their needs. And that’s why US Business Credit Lines has become a significant resource for today’s medium to small business owner.”
“Here’s the thing: banks these days are looking to help a very particular kind of business with their financing needs, banks have a square hole, if you will, and if your business is square-shaped, and you fit into that hole, great. But what if your business isn’t square-shaped? What if it’s shaped like an octagon?”
“Well, guess what, over the past 16 years, U.S. Business Credit Lines has developed relationships with lenders that specialize in octagons, so to speak. We have lenders who specialize in contractors, lenders who specialize in plumbers, lenders who specialize in equipment manufacturers, you name it, and we have lenders who specialize in bridging payroll or covering inventory. And what these lenders have done is develop specific lending products for each of these specific industries and each of these specific needs. That’s a far cry from the bank’s outdated one-size-fits-all philosophy.”
Over the past 16 years, U.S. Business Credit Lines has developed relationships with lenders who specialize in specific industries as well as lenders who specialize in specific business needs such as bridging payroll or covering inventory.
And what these lenders have done is develop specific lending products for each of these specific industries and each of these specific needs. That’s a far cry from the bank’s outdated one-size-fits-all philosophy.
If you would like to speak with Tom Spencer to discuss with your particular business needs, call U.S. Business Credit Lines at 800-706-1786.