Picture still far from rosy for small businesses

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By MonaLisa Como

If you’ve been following the business headlines as of late, you may have noticed some prognostications that 2014 will be the year the U.S. economy hits, and surpasses, its pre-recession peak.

That’s certainly encouraging to read. But as we’ve seen in past years, it is around the year’s end that economists are apt to don rose-colored glasses, almost as if they believe by wishing for better times, they can make that reality come to pass.

That said, it is certainly true that many economic indicators are positive, both here in the U.S. and abroad. But other considerations should temper our collective outlook on what the recovery will look like in 2014.

At the top of the list is the recent decision by the U.S. Federal Reserve to begin rolling back its bond purchases (to the tune of $10 billion a month, from $85 billion to $75 billion). It is encouraging in that some of the biggest minds thinking about our nation’s economy feel we are turning the corner. However, even this seemingly slight change in policy will have definite implications going forward.

The Fed’s bond buying was originally intended to stimulate the economy by keeping interest rates low on loans of all types, from mortgages to business loans. With the change in Fed policy, rates are rising, which will place pressure on markets already dealing with all the travails of a down economy. In anticipation of the Fed’s “taper,” the average interest rate on a 30-year fixed-rate mortgage is now about 4.5 percent – about a full percent higher than it was a year ago, and likely to go up from there.

The same facts are true when it comes to business loans. Banks remain very conservative in their loan-making decisions, meaning many would-be small businesses never get the chance to make key investments, or have to resort to operating off of credit cards. In November, large banks approved just 17.4 percent of loan applications. Before the recession, banks approved more loans than they turned away.

Add to that the fact many banks have been slow to embrace new technologies. That, and continuing dysfunction in Washington that forces businesses, lenders and consumers alike to wonder what government programs will still be in place come tomorrow.

These factors are partly why the alternative-lending marketplace was one of the fastest growing sectors of the financial industry in 2013, and given the environment described above, there is little reason that trajectory will change in the coming year.

Commercial finance brokerage firms don’t approve or turn down loans as they come across the desk. They work with businesses to connect owners with the right lenders. If the firm can’t find a solution that works for all sides, it doesn’t get paid.

Large businesses have CFOs and financial departments that map out fiscal plans and capital strategies. That’s something small- and medium-sized businesses just can’t do, so having a financial partner working in their best interest can be an invaluable resource. There are many different types of financing commercial lenders work with, including but not limited to real estate loans, equipment leasing, accounts receivable financing, bridge and hard money loans, business acquisition financing and more.

The flexibility and personalized service offered by a commercial finance brokerage firm, combined with the present economic climate, means that even more businesses will be looking away from banks and credit unions in 2014.I predict this sector of the financial market will continue to be one to watch for the coming year and beyond.