The ability of small businesses to gain access to the capital markets is currently not one of the biggest concerns of entrepreneurs. In fact, lending rates have not been this dynamic since pre-recession times. According to the latest Biz2Credit Small Business Lending Index, approvals of loan applications were at 25.2% at big banks (assets of $10 billion+), while small banks granted more than half of the small business funding requests they received in November 2018. The economics dictate a more favorable lending environment over the past year and one-half. The Fed has raised short term lending rates from virtually zero to a point now where it makes financial sense for banks to loan money to a growing small business market.
Government-backed SBA loans have also been issued in record volumes. While some still come in the form of disaster relief, a large portion is being targeted to growing sectors of the economy, such as health care, manufacturing, transportation and warehouse. Many of the underlying components of these areas are run by small businesses.
Take a few minutes before the end of the year to get your fiscal house in order. There are a couple of items you should have on your list going into 2019. Preparing now will give you focus and goals to adhere to.
- Plan Now for 2019: Many small business owners enter a new year without having a clear business plan and goals for what they are going to achieve in the next 12 months. Look at your overall business plan and break it down to what you want to accomplish this year. Now’s the time when you can put that plan in place and stick to it for the whole year. Make it your business New Year’s resolution.
- Watch your Profit Margins: It is easy to get excited about increasing revenues in a booming economy. Sales are of course top of the list on your income statement, but don’t forget about net profits. It is also very easy to be more liberal in your spending when sales increase. Be careful to not unduly increase expenditures just because extra cash flow is available. Invest where you need it, albeit equipment, technology, labor, etc., while keeping an eye on line-item expenses to keep your profit margins high.
- Establish Credit Sooner than Later: Just as you would do with your personal net worth, apply for credit or financing while your financial statements are good. Many individuals will get pre-approved for loans for cars, homes and other personal assets. You can do this too. This will benefit you in a couple of ways. One, you will have money already established and available for needs that arise later in the year. Second, as mentioned in this article, money is available to small business right now at affordable rates. No one has a crystal ball on interest rates going forward, so if you are considering a line of credit, you should consider establishing it now.
According to Rohit Arora, CEO of Biz2Credit, a business financing and financial technology (Fintech) firm, “I expect small business lending to be robust as we approach 2019. While we may never again see the days when capital was free-flowing in the pre-recession period of the mid 2000s, the atmosphere for companies that need money for growth is quite robust.” Get it while the getting is good!