Nick and Jennifer Godfrey had several things working to their advantage when they opened up their hair salon in 2006. Business was good and larger projects could easily be financed.
“Prior to 2009, I could walk into a bank and get a loan the same day,” Nick says. “Then in 2009, I couldn’t get the banks to talk to me about a loan. The same banks I had visited on a regular basis changed their requirements, stipulations were a lot tighter and open lines of credit went from $50,000 to $10,000.”
The bank’s tighter purse strings coincided with a decline in the salon’s business. This would have been disastrous had Nick not sought out viable loan alternatives, eventually borrowing from a commercial lender that he later befriended.
Since government-backed programs that were part of the 2008 stimulus package expired, banks have become more stringent in their small business lending practices. This crackdown, according to George Harrop, managing partner of CapitalSource’s Small Business Lending Group, is expected to continue until Congress passes a currently stalled $42 billion bill designed to reinstate expired loan guarantees.
Fortunately, banks aren’t the only source of funding for existing and potential small businesses.
“There are many attractive options to get financing that people can look into,” Harrop says. The key phrase, however, is “look into” since business owners must ensure that they’re borrowing from a credible, non-predatory lender and not, for example, a loan shark.
The easiest way to get in touch with these accredited lenders is to contact the Small Business Administration, an independent agency of the federal government that counsels small business owners.