New funding opportunities and relaxed lending standards are expected to buoy local entrepreneurs.
Small business owners may have reason to smile if the trends of 2012 continue. Lending standards have begun to ease, and new funding opportunities have emerged at the federal, state and local levels.
“The credit crunch was absolutely real. A number of large institutions were absolutely not lending to small business. Working capital was a huge problem,” says Michael Bowers, district director of the Ohio Small Business Development Center at Columbus State Community College. The SBDC is part of a network of centers supported by the Ohio Development Services Agency (formerly the Ohio Department of Development) and the U.S. Small Business Administration.
Credit is “still an issue, but it’s freed up over the past year. I would expect that trend to continue,” says Bowers. During the first month of fiscal year 2013, loans made through the SBA’s Columbus office to Franklin County businesses had already reached 13.6 percent of SBA-backed loans for all of FY 2012, which totaled $81.17 million.
As borrowers and lenders become more familiar with new lending requirements, “I think we’ll see an increase,” says Michael Dalby, president and CEO of the Columbus Chamber. “Another impact in 2013 will be the federal JOBS Act, which allows for up to $1 million in crowd funding you can raise for small business. Other than bank financing that … might be another source.”
Increased funding opportunities combined with the tough job market have spurred many displaced workers to launch small businesses. “About 2½ years ago is when we started seeing the impact of people being laid off,” says Bowers. Since then, more people have been looking at entrepreneurship as a viable option to control their own future.
Proprietors still face a great deal of uncertainty in 2013 over the fiscal cliff, taxes and new health-care regulations. Companies with more than 50 employees will be required to provide health insurance. With rules yet to be issued, Dalby says small businesses are “holding their breath,” waiting on the federal government.
“It just makes [business owners] very conservative. And that conservativeness impacts capital expenditures,” says Dalby. “We see that very measured approach across the board, whether it’s small, medium or large-sized companies.”
Dalby expects a flurry of business sales will close out 2012, followed by a decline in mergers and acquisitions in 2013, when the capital gains tax is scheduled to increase from 15 percent to either 18.8 percent or 25 percent, depending on whether the Bush tax cuts are extended by Congress.
Despite the federal uncertainty, Bowers is upbeat. “2013 is a great opportunity for people to grow their businesses and build their businesses if everything continues.”
Reprinted from the January 2013 issue of Columbus C.E.O. Copyright © Columbus C.E.O.