| By :
Kristin Gabriel
A recent Treasury report stated that in November the country's largest banks cut their collective small business lending balance by another $1 billion. This was the seventh month of declines in a row. The reality is that twenty two banks who benefited most from the Treasury's bailout programs have cut their small business loan balances $12.5 billion since last April. That was when the Treasury began requiring them to file monthly reports. Bank's total lending is down by 4.6% in that seven-month period, to $256.8 billion. The banks say they are lending less for one main reason, and that is because small businesses are risky borrowers. Additionally, many new business owners simply do not want to borrow. When sales are slow, the last thing that people really want is to be in debt. It is the tighter lending standards that have left most small businesses unable to access the credit they really need to grow. Many small business owners say they have not been able to finance buying materials to fulfill customer orders. The Federal Reserve's most recent Senior Loan Officer Study, released in October, lending standards have been growing more restrictive over the last three years. One small business strategy, however, has intriegued a number of small business owners. They have started to employ invoice factoring. Ideal for businesses with customers who pay 60 to 90 days out, factoring leverages small businesses accounts receivables, so they get paid within 24 to 48 hours. Accounts receivable factoring is an alternative form of financing available to the reported 51 percent of small businesses that have experienced cash flow issues in the last 90 days. According to the December Discover Small Business Watch report, the remaining 45 percent of the 700 small business owners surveyed have not experienced cash flow issues, leaving 4 percent who are not sure. in the wake of banks' cuts in small business lending, small businesses are seeking alternative means of funding to ensure success in 2010. This is why in today's credit restricted economy, it is more important than ever for small to medium-sized businesses to know what forms of financing are available to them. The last Treasury report verified the country's largest banks cut their collective small business lending balance in November by another $1 billion. Twenty-two banks have cut their small business loan balances $12.5 billion since last April. Since that time the banks' total lending has fallen 4.Six percent in that seven-month period, to $256.8 billion. ost banks are protecting their internal balance sheets and not taking on the risk in the form of loans to small businesses; therefore, emerging growth companies need to rely on alternative forms of financing like accounts receivable factoring to ensure their success. "Given these types of declines the banks are saying the reason they are lending less is because small businesses entrepreneurs are a risk. In reality, when sales are slow, the last thing people want, or need, is debt," said IFG's Chief Executive Officer George Shapiro. "I also believe this is why we've seen a number of small to medium-sized companies begin to employ accounts receivable factoring." The Discover survey also revealed 35 percent of small business owners rate the current economy as fair, which is up from 30 percent in November. Sixty one percent rate it as poor, while there are 4 percent who believe it is an excellent. The economic confidence among many small business owners in America held steady in December 2009 as fewer of them believed the U.S. economic conditions were getting worse compared to November and more saw conditions for their own businesses getting better over the next six months.
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