Small business finance in the search of innovative solutions


Alternative Financing – the small business finance alternative during economic uncertainty

As a consequence of the distressed and even recovering economy, few commercial lenders are willing to invest in economic growth since most fear that we are in the midst of another crisis. Therefore, banks are neglecting the small business finance services and are compensating for their previous losses by tightening the overall credit standards for small business loans and raising their loan rates.

Some private lenders have successfully provided both working capital and debt restructurings on bank portfolio loans for small businesses as a response to the lack of interest that banks have shown to the small business finance  marketplace, in this way indicating that they are both advocates and allies to the small business owner and entrepreneur.

HSBC Expat The rules and standards that govern small business finance and lending have undergone dramatical change in the last three or four years. Small businesses find obtaining conventional bank funding quite difiicult. Even when a business obtains a conventional bank loan successfully, the terms and conditions of the loan can be quite unfavorable. Moreover, banks are attempting to change their portfolios of small business loans by “calling”  in these loans and, consequently, creating an adversarial relationship between themselves and their borrowers that puts these businesses under too much financial pressure.

It has become very difficult for entrepreneurs to expand their companies and create new jobs for both the local and national economies ever since banks are unwilling to finance small business loans.

Intelligent and ambitious people who have good new business ideas and models have become unable to undertake these new ventures, because they cannot depend on receiving proper funding from banks to realize their plans.

Private lenders have been able to take on some of the functions of the banks and have provided capital for new business ventures whose aim is to keep the flow of capital throughout our economic system. These lenders have become a precious source for the entire small business community.

Private lenders offer small businesses all different types of commercial loans including short term working capital loans; commercial mortgages; SBA loans; equipment loans; term loans and others. Alternative and private financing will continue to grow and more small businesses will seek alternative lenders for their financing needs as long as commercial loans that are offered by banks continue to be so onerous.

Business funding firms can also act as a mediator between the borrower and the bank and can provide the small business owner with expert negotiation skills in terms of restructuring the small business’ existing bank debt to ensure that the bank behaves properly and does not act in a too “enthusiastic” manner during the talks.

A business financing firm can often negotiate a debt restructuring in which the small business borrower will be the recipient of much improved and less unfavorable loan terms and conditions than the bank had previously offered. Some of these improved conditions may be a lower interest rate; a longer term; a smaller monthly payment; less collateral and reduced legal fees.

Small businesses will have to keep on utilizing the services of private lenders and business funding firms in order to make sure that their funding requirements as well as their debt restructuring and bank relationship needs are properly met. Ensuring that these needs are satisfied will be critical going forward for all small businesses to become and remain active in this situation of economic distress.

Do you have ideas or recommendations for business financing firms in Dubai and Abu Dhabi that can help others with debt restructuring, alternative financing or any of the other services listed in this article? Please feel free to discuss it in the comments bellow.


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