On October 1, 2013, the government came to a standstill. Government workers prepared to be off work and without a paycheck until the shutdown was over. Now, a full week later, the government remains closed, and thousands of Americans remain unpaid. Not only does the Government shutdown affect workers, it affects the Small Business Administration (SBA)—which is the government department that lends small business loans.
According to Forbes.com, “The shutdown has forced two-thirds of the staff at the SBA to be temporarily laid off” (Forbes, 2013). As a result, financing options for small businesses during the shutdown are limited.
The Impact on Small Businesses During Shutdown
Although SBA loans account for just a fraction of small business lending, the loans are an important source for small businesses nationwide. And government organizations have stopped all lending during the shutdown. Meaning, the loan process has been halted for them and will not resume until the shutdown ends.
As if small businesses didn’t have it rough enough, now they can’t even get the loans they need. David Goldin of CBS News says, “It adds more of a challenge to small businesses that are the backbone of the economy.” Even if the government were to reopen today, the impact of the shutdown could last weeks after the government re-opens. Just when the thought the economy was picking back up, businesses small and large are forced to consider different funding options.
Alternative Lenders Financing Options Save the Day
Therefore, as small businesses become desperate for working capital, they will look into financing options through alternative lenders, instead of the SBA and other government institutions.
However this isn’t necessarily a bad thing. Alternative lenders come to the rescue during these times, offering working capital at attractive interest rates with speedy service. These types of loans require no collateral or upfront fees. And by financing with an alternative institution, businesses can meet their year end goals without waiting for the government to reopen.
In fact, for most business this is a preferred way to access funding. Customers can enjoy hassle-free funding because there is no waiting as with traditional banks. They are shorter-term than traditional loans and are not based on your credit. Instead, they are based solely on your cash flows. Businesses can qualify to receive up to 5 million dollars.
If your current cash flow situation is positive, then your chances of being approved for a loan are very high. This is not the case with traditional loans through the bank, which most times, only look at credit and amount of time in business. To find out more about alternative loans and how small businesses can thrive amists bad economic conditions, click here.
By: Lauren Rockwell, a business writer and works on the marketing staff at Liberty Capital Group, Inc. She writes about the latest business trends and industry conditions, from international economics to small business funding and financing. Her blogs are intended to offer accurate and concise advice to readers.