Came across an article from a study issued by Industry Canada – a Comprehensive Review Report on the Canada Small Business Financing Act. Had some some interesting facts about small businesses loans and the impact of investing in the business. The report was based on loans granted during the 5 years between 2005 and 2009. Even during the 2008 recession there were some very positive results.
* Small businesses that got loans during the period experienced higher level of sales growth than businesses that did not – in some cases 24% higher sales for each year
* Small businesses that got loans had up to 9% more employment growth
* Small businesses that got loans had higher “survival rates” than for non-borrowers
All sounds good except for one fact in the report…..
* The number of small business loans granted during this period declined by almost 30%.
So, it looks the typical Catch 22….the report encourages small businesses to get loans to invest in their business but the loans aren’t as readily available as they were a few years ago.
This had led to the growth in small business loan alternatives like the merchant cash advance service. A merchant cash advance provides capital in exchange for a small share of future debit/credit card sales. The funding is typically equal to 1-2 months of expected future sales and is repaid on a daily basis using a small percentage of sales. Payments ebb and flow with sales trends giving the business owner greater flexibility to manage cash flow, particularly during a slow season.