You are currently browsing the tag archive for the ‘credit’ tag.
Jargon helps us communicate, especially if you are in on the lingo. But sometimes it can exclude people from engaging in the conversation. I remember the first time someone mentioned to me that an event was ‘one off.’ What did that mean? Eventually, ‘one off’ became so frequently used in my business that I was able to figure out, based on context, what the expression meant.
I recently conducted an unscientific study of 11 business people – Question: If I used the expression ‘trade credit’ would you know what I meant?
If you just asked yourself what is ‘trade credit’, you are not alone. Take a look at how these successful business people responded.
For the record, trade credit is the credit you extend to your customers allowing them to pay on terms (30 to 45 days is typical).
According to American Banker, banks might actually be getting back to commercial lending. Credit checks are up 5% – 10% this quarter over last year (Paynet Inc.). Whether this means banks are looking to make loans or small business owners are strapped for cash (or both), it does means that financial institutions are doing more diligent credit research. Kenneth Lewis from Bank of America says, “We’re in a recession, which means that demand for credit is lower, and credit standards are tighter. But that doesn’t mean ‘banks aren’t lending.’ In fact, we’re out there in the marketplace making every good loan we can, growing our relationships with existing customers and creating new ones.”
This week the government announced that the Treasury will spend $15 billion buying back securities made up of packaged SBA loans.
A lot has been written about the limited access to credit for small businesses. This particular move is intended to free up capital for banks to make more loans.
Yet Matt Bandyk of the US News and World Report pointed out that this may only make a marginal difference in the small business credit crunch because SBA lending is such a small piece of the market.
According to the February Discover Small Business Watch Survey, 90 percent of small-business owners have never applied for an SBA loan. Even if SBA loans became easier to get, 58 percent said they still wouldn’t be interested in SBA loans.
If small businesses aren’t looking for SBA loans, maybe the government should consider how to make SBA loans more attractive to the borrower. If not, freeing up available capital may not be enough.
Never has this statement been more true than it is today for many American businesses. The world credit crisis that began in mid-2007 has caused the global credit markets to contract and US banks to become much more restrictive in their lending.
Over the years, I have started many successful companies, and I am impassioned about the growth of American small business. Particularly in this economy, entreprenuers have to be creative to be successful. While there is a restricted access to capital from traditional forms of financing, in this credit crisis, there is significant opportunity for B2B sellers to grow their businesses by granting to their buyers more credit on more flexible terms. At the same time sellers are growing their businesses, they are building relationships with buyers that can be an enduring competitive advantage for years to come.
I started this blog to explore the many benefits of outsourcing trade credit, and I look forward to discussing alternative sources of financing with you.
