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  • Writer's pictureViolet Maile

Current finance trends for small businesses

People seem to have a positive attitude about launching a small business before the pandemic. Even members of Generations Y and Z are attempting to participate. There are numerous causes for this as well as numerous consequences.


However, COVID-19 has had a severe impact on public health and has had a catastrophic effect on the global economy. The pandemic has been and is probably still going to be one of the worst crises that small businesses have ever experienced.


Current financial trends for small businesses:


1. Issuers of credit cards expanding credit lines

Start with business credit cards and loans. Lenders and credit card firms in the United States responded to the outbreak by reducing credit limits and halting lending. For many small firms that needed access to financing to maintain operations, that made a bad situation intolerable. "Sometime in March, traditional lenders pulled back significantly in a major knee-jerk reaction. The rate of business failure increased as loans were very difficult to obtain, according to Gulati. Line reductions that occurred within a few days or weeks were unprecedented in the credit card industry. Banks and credit card firms took months to respond during the recession of 2008 and 2009, but technological advancements and connectivity with business bank accounts will make it much simpler to spot warning signs and take action in 2020. Credit card businesses can now more accurately assess COVID-19 risk and feel more at ease offering credit as 2020 comes to a close. Gulati observed that "more progressive card issuers are starting to increase lines again." Credit issuing partners come to us for assistance in determining when it is safe to lend and increase lines once more because they have big plans for 2021, according to them.


2. Open for business are lenders

In 2022, more than only companies that offer corporate credit cards will be in operation. According to Brock Blake, CEO of Lendio, banks, credit unions, internet lenders, and fintech companies are all ready and able to lend money to small company owners. He claimed that lenders have a desire to lend, despite the fact that there are greater restrictions in some industries and stricter underwriting standards for small business loans. The executive said that asset-backed, Small Business Administration, and cash flow loans all perform well on Lendio. According to Blake, "We anticipate the SBA to raise the guarantee from roughly 85% to 90%." Lenders will feel more confident issuing an SBA loan as a result. More lenders will provide their services to small firms as liquidity rises. This means that business owners with strong credit scores will be able to borrow money at low costs. Banks and credit unions will still contribute to the business lending market, but alternative lenders and fintechs are predicted to dominate in 2022. Since investors aren't earning much return outside of the stock market, they would be more likely to lend their money if there was less COVID-19 uncertainty. According to Matthew Gillman, CEO of SMB Compass, "a lot of money is flooding the non-bank loan sector because bond returns are low." "Alternative lenders are looking forward to the new year. A lot of liquidity will be present, but not in the form of bank borrowing.


3. To get through the winter, conduct another round of PPP.

Small company owners, particularly those in the retail and hospitality sectors, have been hardest hit by the pandemic. The Paycheck Protection Program was launched early on by the government to assist struggling business owners. If small business owners used the loans to keep employees on the payroll, they were forgiven. It was a well-liked program that was rapidly finished. Since then, coronavirus incidence have skyrocketed, and places like California are currently seeing widespread lockdowns. More assistance is arriving after months of squabbling. Congress approved new legislation last week that allocates $284 billion in PPP loans to small firms. Small business owners that secured a PPP loan but suffered a 25% or greater decline in sales may be eligible for a new PPP loan. According to Blake, "our expectation and hope was that folks in Washington will put aside their petty differences and concentrate on the small businesses that need another round of PPP to get through the winter. "It would be a very long and dark winter if it didn't pass. More than before, there would be a lot more business closures.


4. Unmet financial needs will be met by alternative sources of capital.

Loans might not be an option for many other business owners, particularly if they suffered large financial losses as a result of the COVID-19 pandemic. In certain circumstances, finding alternate sources of funding—like alternative lenders or investors—might be essential for helping many companies secure much-needed capital. Alternative sources of funding will probably be crucial for keeping enterprises solvent, according to Lawless. Grants, fintech, venture capital, angel investors, peer-to-peer lending, and crowdsourcing are a few examples of alternative sources. These are crucial because many enterprises that truly want money won't be able to satisfy the requirements of conventional funding sources because [the COVID-19 pandemic] has negatively affected their balance sheets.


5. Social media marketing expenditures are rising

It is hardly surprising that social media has become a target for marketers as a result of the top social media networks' combined billions of users. After 2021, that tremendous growth won't end. According to projections from the insurance company Finaria, social media ad spending would rise by 15% in 2021, reaching a total of $105 billion. That is almost twice as much as the $54.4 billion total spent on social media advertisements in 2017. According to Ari Zoldan, CEO of Quantum Media Group, "year after year, we're seeing spend on social media climb, and this year it was a tremendous increase." Everybody was compelled to reduce their reliance on conventional brick-and-mortar marketing. Many of them were compelled to switch to digital because it is working so well!


6. Small firms are making investments to adopt new technology.

According to Apfelbaum, a widespread misunderstanding about emerging technology is that small firms believe it to be the domain of large corporations. Apfelbaum asserted that the contrary is actually true. If new technology is released and you run a small firm, you can use it right away, he said. When a large corporation has tested and set up everything, they don't want to modify it again because they have already invested so much. Small firms have an advantage because they can move quickly and adjust to new technology, and in 2021, small businesses will be the ones driving widespread adoption of technologies like AR/VR and machine learning.


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