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There are certainly some very positive findings in the recent National Association for Business Economics (NABE) survey, and this is welcome news. The respondents indicated that their economic outlook has improved, profits have increased, and job creation has increased.
However, this finding is troubling:
Nearly half of those surveyed said credit conditions were hurting their operations, compared with 35 percent in January.
Here’s my question: Why are MORE companies saying business credit conditions are hurting operations than in January while at the same time businesses are saying economic conditions are improving?
I believe the short answer is that more businesses are in the position where they NEED business credit as the economy recovers (efficiency is at an all time high– they need to hire; they are getting more orders, etc.). Unfortunately, as our friends at Greenwich Associates have recently stated, banks are notorious for resuming normalized levels of lending on the back side of a recession. Ftrans’ research indicates a 12 to 18 month horizon before business lending may normalize.
Businesses that have survived phase I of the economic downturn and credit crisis now need to get creative to finance growth in an upturn. Welcome to the Catch 22 of the continuing credit crisis.
In consumer lending, Lending Tree made a name for itself with positioning along the lines of, “When banks compete, you win.” Thanks to social lending sites such as Prosper and Lending Club, today’s positioning is more like ”When your neighbors compete, you win.” This is particularly true for micro and small business borrowers that are traditionally underserved by banks because they fall outside of the bank’s “credit box.” Read this recent article in Forbes for more insight. Our experience in the market tells us:
- Lending and investment options for small businesses continue to be limited
- Small businesses need to be creative and consider all options to improve their balance sheet, cash on hand, etc.
- Even businesses that are able to identify interested investors need to have processes in place that provide insight into customer risk, etc.
- Outside investment is only part of the solution
After a rigorous selection process, Ftrans is pleased to be in great company as a presenter at Finovate Spring 2010. Each year, Finovate showcases a select group of the most cutting edge financial and banking technology companies from all over the world. From start-ups to large enterprises such as TSYS and Fiserv, the latest fintech will be presented on May 11, 2010 in San Francisco. If you are interested in the fintech space and haven’t been to a Finovate forum, then we highly recommend your participation. Stop by and see us while you are there.
You may have seen Ftrans and one of our client’s featured in the Wall Street Journal article, “Asset-Based Lending Grows in Popularity.” We’re happy to be associated with such success stories as Seth Chapman and Weezabi and know that many other businesses are benefiting from these types of services as the stigma of asset lending wears off (and the traditional credit markets remain dry). Asset based lending is no longer viewed as “lending of last resort.” As a matter of fact, it is increasingly becoming a preferred form of financing. As indicated in the article, asset based lending (excluding mortgages) grew by 8.3% in 2008
The data supports this trend. According to the FDIC, traditional, commercial lending is DOWN 14% Sept. 2009 over September 2008. Thus, we have every expectation to believe that asset lending will have grown significantly in 2009. When it comes to providing growth and working capital to small and medium businesses, asset based lending is carrying the day.
The moral of the story is two fold (1) Consider tapping your assets such as receivables for access to capital and (2)….. If you need a whole buch of creatively designed t-shirts, call Seth — He’ll take care of you.
Recently, our VP of Marketing, Jim Lester, participated in a product innovation panel hosted by the Technology Association of Georgia (TAG). Here’s the link for those interested in the panel’s perspective on innovating during an economic downturn: http://tagtvonline.com/index.php?option=com_seyret&Itemid=29&catid=38
