Small and midsize businesses have been put under immense pressure due to the ongoing COVID-19 health pandemic. Many business owners have struggled to pay their employees, while others are heavily dependent on cash flow and access to financing. With so much disruption, having flexible options to fall back on can make or break a company in these current economic conditions.
In fact, only one in five healthy businesses had sufficient cash reserves to continue normal operations if they experienced a two-month revenue loss. These firms then rely on personal funds or debt to bridge the gap.
Unfortunately, banks and traditional lenders have had trouble adjusting their policies in regards to lines of credit to help business owners weather this storm. Proof that during times of financial crisis, such as the current COVID-19 pandemic, many traditional lending institutions realign their lending guidelines, leaving many small and mid-sized businesses wondering where to look next if they don’t qualify.
Not to worry, though. There’s hope.
Many financial and entrepreneurial experts recommend that smaller companies consider approaching alternative lending sources rather than the big banks. It’s not that the big guys can’t, or won’t, help you. Sometimes, though, an alternative lending company might actually be more in tune with what you need and easier to work with.
“Often,” says Eric Inspecktor, co-founder and senior underwriter at Toronto lending firm CORFinancial Corp., “owners of small and mid-sized businesses need to make a strategic acquisition — like absorbing an even smaller business that’s being sold. Or they want to acquire property, or buy something that helps them grow. This is where a smaller lending source can be of help to them.”
Eric Inspektor is a 30-year veteran of advising smaller companies and structuring non-conforming or asset-based loans with the prime focus on ensuring that viable companies flourish. He says that because CORFinancial views independent companies in perhaps a more empathetic way than a larger institution might, many consider him and his company a partner in achieving growth, as they’re able to get a short-term loan when it’s most needed.
“Alternative lending sources have the ability and are willing to work with businesses of all sizes,” he notes.
Both in Canada and in the U.S., the recent pandemic hit the banking industry and other financial institutions hard. In fact, just before the pandemic arrived on North American shores, the Wall Street Journal wrote that, “Not since the Sept. 11, 2001 terrorist attacks have Wall Street banks faced a logistical challenge like the one potentially posed by a coronavirus outbreak in the United States. Sustained quarantines and widespread business closures would hit credit-card and corporate-lending businesses. Further interest-rate cuts, which the Federal Reserve may use to shore up the economy, would crimp profits.”
Since then, we’ve seen how business can be affected by a crisis. Many financial, as well as other, institutions have experienced losses in revenue and increased costs as employee work habits are realigned, supply chains are disrupted, markets go up and down, and more.
As this has happened, many small and mid-sized companies have faced mounting costs and losses. A number have shut down due to their inability to be sustainable.
Eric Inspektor advises, “Before your business closes for good, consider alternative financing options. Turn to the professionals, the people who, like you, are also frustrated with the banking system.”
For those that were in growth mode before all the chaos occurred, an alternative lending source might be an effective way to ensure that needed capital is available.
Alternative lending companies often tend to be more nimble and agile than many of the big banks and other lending institutions. And they’re enthusiastic about working closely with the owners of smaller and medium-sized companies who aren’t able to wait until the crisis is over and things to stabilize to get on with their work.