How the Finance Industry Can Help Businesses Hurt By COVID and the Recession

How the Finance Industry Can Help Businesses Hurt By COVID and the Recession

February through April of 2020 was difficult for American businesses: 3.3 million permanently closed with the start of COVID and the resulting recession. With small businesses accounting for 99% of U.S. firms, those closures represent a hard hit on a significant part of the economy.

Despite the delta variant, business owners are beginning to strategize on how to position themselves so that they can thrive in a post-COVID world. It raises the question of what can be done to help them as they recover from 2020. One source of assistance may be America’s financial industry, with its access to multiple funding options. We asked Brian Allen, founder and CEO of Lime Funding, for his insights into how the country's lending companies can help businesses as they rebuild and leave the recession behind them.

Speed Up the Financing Process for Business Owners and Help More to Be Approved for Loans and funding 

The average business owner, Brian says, can expect to wait anywhere between 30-180 days to be approved for an SBA loan. “This seems too long for companies that are struggling to get on their feet, rehire employees, and make profits. There is an old adage that says that in order to make money, you must spend money. Business owners need to invest in human resources, accounting, marketing, and other departments in order to grow. Having to wait up to six months to receive funding could pose a challenge, especially since they are recovering from a serious recession.”

One possibility is that the loan and overall financial industry provide business owners with a shorter waiting period for financing. “Companies could benefit from being able to attain capital funding within 2-3 days of applying. That kind of quick access might give them the money they need to move forward with their rebuilding,” Brian suggests.

He adds that allowing more people to receive business loans could be beneficial. “Remember that by November 2020, small business loan approval percentages at big banks had dropped to only 13.3%. Small banks weren’t much better,” he says. “They were at 18.3%, down from 50.5% the previous year. The situation for businesses was actually worse than this, as before the pandemic, worldwide there was a $5 trillion gap between the financing needed by micro, small, and medium-sized companies and the financing they could find at institutions. If the loan industry can help more businesses to obtain loans, this may help owners to recover faster.”

Offer More Debt-Relief Options for Businesses That Are Struggling

The average business has $195,000 of debt, and business owners find themselves having difficulty making multiple payments. One possible solution is for the financial industry to offer them access to reverse consolidation financing. “Businesses may be able to find relief by obtaining one lump sum of funding that can cover all of their debts, with the owner now just making one payment on them each month instead of multiple,” Brian explains. “With the alternative option of more reverse consolidations offered, owners could possibly have more capital on hand because of lower payments on their debt.”

Lower the Interest Rates for Loans

Brian affirms that today’s interest rates are relatively low. “However, when owners apply for small business loans, they can encounter average interest rates between 2.58-7.16% at banks. Rates will, of course, depend on a variety of factors, including the applicant’s credit history, collateral, and financial situation, but can the finance industry do better? Can it offer lines of credit with interest rates as low as under 1%? Lowering the rate could be beneficial for business owners who are trying to get back on their feet.”

Provide Help for Businesses With Delinquent Customers

The recession caused an increase in delinquency: 16% of U.S. households are behind on rent, and 71 million Americans have debt in collections. Business owners face a double hazard when a client does not pay: they lose out on payment for their products or services, and they lose money with the time they must spend pursuing the payment.

Invoice factoring, Brian thinks, can help businesses collect from delinquent customers. “A financial services company, its partner banks, and investors can buy some or all of a business’ outstanding invoices, then collect payment directly from the customers. By giving more business owners access to services like this, they could be freed from the time spent seeking the payment and focus on other aspects of strengthening their businesses.”

Assist Business Owners with Creating Stronger Business Plans

Brian states that the financing industry can help owners to create new, stronger business plans that could help the company find success again. “They can help owners understand how to navigate the 2021 economy and beyond and forecast when or how to raise capital for expansion. They can also help them to choose a business model for tax purposes and find market research that can give them actionable information. With this, entrepreneurs may be able to better envision where their companies are going and steer them through difficult times.”

The Finance Industry May Be Able to Help More Business Owners Recover

How a company recovers from a recession, let alone reopens, will undoubtedly involve multiple factors. However, financial services companies like Lime Funding may be able to play an important role and provide options for businesses that need assistance during a difficult economy.

For more information on Lime Funding, please visit:

Website: https://www.limefunding.org/
Twitter: https://twitter.com/limefunding
Facebook: https://m.facebook.com/limefunding.org/?ref=bookmarks 

Brian Allen: brian@limefunding.org

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