Small Business Owners Find it Hard to Stay Afloat

by: Janna Weiss

In these troubled economic times, it seems that everyone is feeling
the pain of the credit crunch. From the working class all the way to
the national government, people are finding it hard to obtain loans
that were readily available as recently as last year. Amid the
rhetoric about Wall Street and Main Street, one class of people is
largely overlooked: small business owners.
For businesses to thrive, they need financing. Small business owners
and entrepreneurs have it rough. Every business entails start-up
costs. Plus, there has to be enough money to keep the business afloat
until it attains profitability – which can take years. With banks and
lenders shutting their doors to everyone with less than stellar
credit, what can small business owners do to make ends meet?

For many, it's a balancing act to stay on top of personal finances and
business costs. With an unprecedented number of small business loans
getting declined – the Small Business Administration approved 28,000
fewer loans in 2008 – owners are tapping their savings and retirement
funds and maxing out their credit cards just to keep their dream
alive.

Sadly, some of these dreams are currently on life support and fading
fast. Skyrocketing food and fuel prices have made business ownership a
costly endeavor. Financing is scarce, customers are making fewer
purchases, and those who do buy from small businesses are having a
tougher time paying up. Last year, it took an average of 30 to 60 days
for a small business to receive payment. Now the average is 120 days.
Says Tony Wilkinson, president of the National Association of
Government Guaranteed Lenders: "I've been at this since 1980, and I've
never seen it this bad."

Credit cards, especially those designed for small business owners,
fill in the financing gaps. But the credit crisis has brought with it
higher fees and lower spending limits, making this method of financing
less economical than before. Home equity is also in a slump.

Some business owners turn to private lenders for their loans. If your
business is industry-specific, you might be able to find a private
lender willing to back your venture. You could also explore equity
financing, giving up some of your interest in the company in exchange
for money. Relatives are another good source for financing. They're
usually more generous and less stringent about your repayment terms.

To secure funding from any source, you'll need a great business plan.
Sell your idea and back it up with hard data. Explain why the business
is a good idea, and draw up a timeline for your profitability. When
lenders see that you've done your research, they will be more likely
to take a risk and invest in your venture.

Small businesses employ 116 million workers and crank out half of the
U.S. gross domestic product, according to the Commerce Department. If
they fail, our whole nation will experience the fallout. Here's to
brighter a financial future for us all.