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In the News: Less Loans for Small Business Owners?

Hey Sellers, 

 

We’re trying out a new type of QOTW this week: In the News!

 

This week I ran across this super interesting article about big drops in loan availability across the board, which seems to be affecting small business owners the most. I’d love to hear if you’ve felt it in your business. 

 

US News & World Report: Small Business Owners Feel the Credit Crunch

 

The article explains how small businesses have been struggling with loans due to a consistent increase in interest rates, making it harder for businesses to pay back. With banks less likely to offer loans, the article shares that approvals have been dropping every month for over 9 months, and down about 50%. They share the example of a pretty successful long-time business getting rejected for a $50,000 loan, despite a history of profit.

 

Pesso_0-1681909275992.png

 

Overall it seems like right now it’s a really difficult prospect for business owners who are in a pinch and need some financial infusion.

 

When I owned my ice cream shop, we didn’t even really try to get loans from a traditional bank. It all seemed too complex and complicated, and we didn’t think we would be approved based on our history. We put a lot on credit cards and dealt with the fees. Towards the end, we did take a few Square Loans which were essential in keeping us afloat through the winters, especially around the pandemic. 

 

I’d love to hear your perspective on this:

  • If you’ve applied for a bank’s business loan recently, how did it go?
  • Are you worried about being able to get funding in the future? 

 

Can’t wait to hear your thoughts!
Pesso

 

️ Aylon Pesso, he/him
Small Business Evangelist, Square

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The best Small Business Loans are through the SBA.gov website. This site is designed to help small business owners. There are 5 different types of tiered loans for small business owners. There are government certified loan companies, taking the worry off of small business owners. 

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Everyone should ready the fine print of SBA loans... my Father took an SBA loan and used his home as collateral.. while you can discharge SBA loans in bankruptcy.. they can still go after your collateral used to secure the loan.

 

Dina
Co-Owner Amityville Apothecary
www.shopamityvilleapothecary.com
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Oh wow, thanks for those extra insights, @DLRosenberg ! Definitely good to keep in mind!

️ Aylon Pesso, he/him
Small Business Evangelist, Square

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Thanks for that info @KayMandi23EXP - good to know that there are those options there!

️ Aylon Pesso, he/him
Small Business Evangelist, Square

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Awesome, thanks so much for sharing, @KayMandi23EXP !

Have you gotten or applied for one of these loans before?

We did the PPP, but that's the only SBA interactions we had.

️ Aylon Pesso, he/him
Small Business Evangelist, Square

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Well, that's crappy news.  Honestly, I've found spending a few hours a week researching and applying for grants so much more successful than trying to secure loans.  I take Square Loans occasionally when I need them for a project but that has been about it.  The SBA process just hasn't been easy to navigate.  

Doran

Esthetician
Haute Beauty Guide
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Same. I've applied for lots of grants, but I went through the process of applying for a loan 1-2 times and thought - never again. Incredibly invasive process, very time consuming, and in the end we were either denied or offered an especially high interest rate that would have done us no good long-term. I've gotten grants every year we've been in business so far, so fingers crossed that continues until we reach the point where we don't need them anymore. 

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Oh wow, thanks for sharing @Tamyra_Paunchy !

 

Amazing that you've had so much success with grants! Which ones did you go for?

 

That's so unfortunate that it was so invasive and that all of that time and effort was for nothing with a high rate or a denial. Unreal. 

 

️ Aylon Pesso, he/him
Small Business Evangelist, Square

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May I ask what types of grants are you getting and from where?  I’m a cosmetologist and I wouldn’t know the first thing about finding grants and apply for them.  

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what kind of grant i haven't applied for any kind of grants. pls let me know thanks

 

cristina

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I'm loving all of these grant recommendations & tips -- thanks for sharing @Doran !

Definitely sounds like a better investment of time and effort.

 

I digg the use of Square Loans too.

 

What about the SBA process did you find challenging?

️ Aylon Pesso, he/him
Small Business Evangelist, Square

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Haven’t noticed any change in access to loans or credit. I am fortunate that I have been dealing with the same bank for over 30 years and while it’s a mid size bank in the overall banking industry it’s still a local small town branch where everyone knows everyone else. If I need a loan then I just tell them when I am making my weekly deposit and they normally have the approval in a couple of hours and the paperwork ready to sign the next day. It probably helps that I have always ran my businesses as sole proprietor so instead of it being business credit everything is based on my personal credit 

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Thanks for sharing @homeprogreen --


That's amazing that you've had such a great banking relationship for so long, with something that's local but also on the bigger size. Being able to have that close connection and be able to informally apply for a loan like that and is absolutely huge and so valuable! 


Any other secrets to building up a relationship like that?

️ Aylon Pesso, he/him
Small Business Evangelist, Square

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Ain’t no secret to it. Just the way I was taught to do business. Get to personally know customers and vendors. For customers it’s just simply remembering what they normally get, asking how their family is doing. For vendors and stuff like banks it’s the same kind of thing. Once you’ve built up that kind of relationship over time it works in your favor. Most people nowadays go around looking for the best deal in the short term not realizing that it won’t benefit them long term 

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I’m in Canada and don’t know about the US states or city business development programs. In my province they have small business micro grants for ie. developing technology into current business operations just for example. Also the government have micro business grants we can apply for through a BD program. As for loans I have never needed to and if I was to even consider a loan I would enquirer about grants. I think most of these go unapplied for.

Ryan Anton Schaffer RMT
www.reginamassagetherapist.com
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Thanks @ReginaRMT -- 

 

That's pretty incredible that there are micro grants available that are available for small businesses over there! 

 

And so great that you haven't needed to go for any loans so far. Definitely a great tip to look for grants first and seeing what's out there and eligible and not being utilized. Thank you!

️ Aylon Pesso, he/him
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Doesn’t really have an impact on my business yet. But it isn’t great news either way. As a startup business with all original products, my business doesn’t meet the minimum thresholds for most business loan programs. That is why everything I’ve done is self-funded. 


This of course has its pros and cons. Pros, no debt to carry and no restrictions or burdens on timelines. Cons, not being able to scale the business as quickly as I desire.

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Thanks for sharing, @SlyTheSpy -


That's really interesting that y'all are under the thresholds for most loans -- this could definitely mean that more smaller businesses will be getting to that point. 

 

Not having debt is definitely a big plus, but I can absolutely see that it would be harder to grow. Self funding is super difficult in any and all of the ways. It can definitely be a bit of a catch 22 -- needing to grow in order to make more money, needing more money to in order to grow, needing to grow in order to make that more money. 

 

How have you been dealing with it so far? How have you been self-funded?

️ Aylon Pesso, he/him
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Thanks for the response.

 

The majority of my funding came from 3 sources, my full-time job, an annual bonus from that full-time job, and a tax refund. That is how most of it started.

 

Since my products are manufactured overseas, my unit price gets lower with a larger bulk order. Luckily, my manufacturer will fulfill any order from 1 unit to thousands. This has benefited me greatly. I can do a cost analysis to determine the fewest amount of games I need to order to make a few dollars per unit. Future orders for bigger orders will yield lower unit prices and increase my profits. 

 

The benefit is that I can keep my inventory low and really look at how best to connect with my customers and grow engagement. So although things have been slower with self-funding, it has helped me make tough decisions to stretch the amount I do have.

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Thanks for sharing so much, @SlyTheSpy !

 

Oh wow, that is a really scrappy and incredible way to start and run a business -- so wonderful that you've been doing it and making it work.

That's huge that you don't need to keep that much inventory, and great to have the advantage of the profit increasing when you can. Getting to play around like that to find the best profitability can be fun sometimes!

 

Rooting for ya!

️ Aylon Pesso, he/him
Small Business Evangelist, Square

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