Analysts remain optimistic that the final phase of 2021 carries lots of hope for small businesses in the US. In particular, US business financing prospects seem to grow brighter by the day. I the wake of the pandemic subsiding, most credit card issuers and small business lenders successfully reopened for business. This means it was easier to secure funding. At the same time, technology continued to play a crucial role in helping business owners manage the cash flow.
According to a Capital One survey, 67% of small business owners recently expressed confidence that they'd return to full business operations and earn revenue comparable to the pre-pandemic situation. Another 60% of the respondents said they believed the US economic prospects would be favorable in 2022. Mr. Sameer Gulati, the CEO and President of Plastiq to the business.com outlet expected things to start reopening fully and growing again either in the 3rd or 4th quarter of 2021. But this is not the same as saying the typical small business owner would bounce back to normal operations post the pandemic. The truth is millions of thriving small businesses were hit hard by the pandemic; many of them even closed permanently. However, companies that hanged on and survived were set to enjoy many financial options in 2021/22, much more than they did at the height of the pandemic in 2020.
In this regard, we might begin by considering the situation of credit card and loan issuers. Once the pandemic set in, most US credit card companies and lenders quickly reacted by slowing down lending and slashing the credit card limits. Of course, this worsened an already bad situation. For many small businesses that sorely needed access to such facilities, the situation became untenable. Mr. Gulati says: "Around March 2020, the traditional credit card providers experienced a massive knee-jerk reaction; they pulled back hard. Hence it became very difficult to access a loan anywhere. As a result, the rate of business failures increased exponentially." He adds: "This was the first time in the entire credit card history that there was a massive line reduction in just a few days or weeks." Comparatively, banks and credit card companies took months to react to the 2008/2009 recession. What was the difference in 2020? It the current scenario, financial institutions enjoy unprecedented technological advances- technology has gradually integrated with most business bank accounts- this makes it much easier to see the red flags well in advance. However, as we move ahead, most credit card institutions can now gauge the Covid-19 risks clearly; it follows that many are willing to extend credit facilities for thousands of small businesses.
"In 2021, there was a more progressive credit card issuing regime; most institutions were willing to increase the lines," Mr. Gulati says. "Generally, many credit-issuing partners are indicating they have big plans for 2021 and beyond."
Mr. Gulati, however, notes that the increased credit facilities aren't available for everyone across the board. He said that most credit lines are steadily rising for sectors of the US economy that have striven t hold up during the pandemic. These sectors include e-commerce, construction, healthcare, and professional services. Brock Blake, the Lendio CEO, observed that many banks, fintech, online lenders, and credit unions are more than willing to offer cash t small business operators without stringent conditions. "We generally expect the SBA to increase the guarantee from 85% to 90%," said Blake. "This will increase lender confidence on the issuance of SBA loans," he concluded.
Analysts expect that with increased liquidity, most lenders will happily serve the small businesses. In turn, this indicates many businesses owners will find it cheaper to borrow since they already enjoy good credit scores. Further, banks and credit unions are expected to play a crucial role in business lending. However, pundits predict that fintechs will be the greatest and most significant issuers of loans in 2022. Most investors are also willing to lend more because they aren't getting much yield outside the stock market. Ultimately, "Lots of money is now flooding the non-bank lending market," says the CEO of SMB Compass, Matthew Gillman. "Yes, the new year will be quite exciting for many alternative lenders. We expect lots of liquidity beyond the form of banking financing," he says.