What a great time to start a business, you can get the money cheap and interest rates are at a rock-bottom price. Unfortunately they probably aren’t available to you, it is just like buying a home these days, no longer can you get super low interest rates with zero down, those days are over. Not long ago, someone came to our think tank with a brilliant business plan, one which was so good, I had considered suggesting it to my friends who are Angel investors, or pitching it to other acquaintances who are venture capitalists.
The young man and his team wanted to get cheaper money, they wanted to borrow it at the low interest rate, and because the idea was so good, and their economic prospects completely viable, they wanted to build their business themselves, and keep the equity. Who could blame them? And yes, they would be slightly disrupting a particular industry sector, but at the same time they would be bringing new innovations which would be widely received by both consumers and corporate clients.
Only one problem with this, the chances of them getting a business loan aren’t that good, nobody on their team has much in the way of assets, although they are laden with student loans. It’s a smart group, they know what they’re doing, and they are willing to work hard in the startup. The business plan is sound. Still, from a realistic economic standpoint, even with these low interest rates, we are not going to spur growth in the US until small businesses and startups can partake in such loans. This company in my case study here cannot grow, cannot hire more employees, and can barely get off the ground without an infusion of cash, whether it be from a loan or another source.
A good illustration of this point perhaps was best stated on June 19, 2012 in the Wall Street Journal article “Fed Wrestles With How Best To Bridge US Credit Divide,” by Job Hilsenbrath, however in his article he discussed the challenges for the middle class for buying cars, home upgrades, or helping out during transitions in employment or being slightly under employed temporarily. One person in his article stated; “you can get money all day long, if you don’t need the money.”
Therein lies the real problem. Am I for expanding the SBA loan program? Actually, I am not because as a former franchisor I learned about all the hoops companies had to go through, and the types of loans the SBA was willing to make, and the conditions they put upon those businesses. They really aren’t that good of a deal.
It seems as if the government hopes that small businesses will expand their current businesses and take out SBA loans, but anyone who is in business who needs the money to stay in business, or to grow, probably doesn’t want to take out any more loans and get themselves in more debt right now. Those companies that are doing quite well, those that don’t really need the money, well, there is plenty of cheap money out there without having to deal with all the red tape and the SBA. Okay so, I hope you will please consider all this and think on it.