Credit access is a concern for small business management
October 09, 2013
Small business management is facing heightened concerns regarding their ability to acquire loans during the government shutdown. Companies may need to improve their accounting management to handle finances during the rough period.
Small business confidence was down, although the impact of the government shutdown was still uncertain, according to the National Federation of Independent Business' monthly "Small Business Optimism Index." Many companies were reining in their expansion plans and employment experienced a slight decrease. Health care implementation as well as access to credit have been growing concerns for many small-business owners.
While the shutdown has not had a significant impact on small-business owner confidence, it is affecting companies' ability to secure loans. Organizations can obtain government loans through the U.S. Small Business Administration, but the shutdown has halted paperwork processing, The Wall Street Journal reported. Lenders are continuing to submit and process loans, but small businesses will not be able to receive them.
Delayed credit access could slow business growth
To obtain a loan, lenders must confirm the recipient's immigration status. Although the federal immigration agency is still open, they have not been receiving requests from the SBA. If small-business owners had scheduled hiring, these plans could be delayed. Some companies rely on government-backed loans as working capital, and experts are concerned small businesses will seek alternative lenders who grant loans with much higher interest.
Even when the government shutdown ends, small businesses may still have to wait an extended time for approval. The SBA will have a backlog of paperwork, and this could delay loan approvals for up to six weeks for some business owners. The normal wait time is two weeks. Government-backed loans typically have an interest rate ranging from 5.5 percent to 6.5 percent compared to conventional bank loans that charge 8 percent, The WSJ stated. The longest delays will most likely be through the standard process because this requires banks and lenders to submit paperwork to the SBA to be reviewed before they can be approved.
While the shutdown was still a threat rather than a certainty, the SBA and banks rushed to process loans before federal agencies closed. It may be difficult for small-business owners to acquire a traditional loan in the mean time. Small companies may need to be creative with how they respond to the challenge. Small business accounting software can help owners manage finances.