Will Project Scalpel Affect Small Business Lending?
“Project Scalpel” shows that banks are still focused on cutting costs. As a business measure, this seems reasonable and plenty of business owners can probably relate to the desire to cut overhead and to trim costs wherever possible. But what could this mean for businesses wanting to borrow money? Will big banks’ desire to reduce costs lead to tighter lending requirements?
What is Project Scalpel?
At its most basic, the so-called Project Scalpel is about sharing information to help remove redundancy and allow banks to save money since they won’t have to each reinvent the wheel and maintain duplicate systems. Essentially, large banks such as Bank of America and Goldman Sachs are looking to collaborate to cut back on back-office expenses. Now, these cost-savings measures are focused on stock processing and bond transactions, but it isn’t a stretch to imagine how banks may turn a lean fiscal eye to lending.
After the recession, most large banks cut back on lending to small businesses. While it was already difficult to secure funding in this manner, business owners saw this funding source dry up before their eyes. While the economy has bounced back by most measures, lending to small businesses has only improved marginally. Many small businesses have been left in the lurch and unless the banks see an increase in revenue to justify their small business lending practices, they may not have any justification for increasing their lending at a faster clip. After all, for big banks, small business lending is a risky activity that comes with little advantage. For business owners hoping to secure funding at a bank, often times, the hoops imposed by the banks are difficult to jump through and frequently not worth the trouble. Add to that the length of time it takes to process these loans, and for many business owners, the bank lending route is not an adequate solution to their financial needs.
Seeking Alternative Funding Sources
If banks do maintain the slow growth they’ve instituted in their small business lending activities or if they cut back, business owners must be ready to investigate other options for funding their business needs. These include using a personal line of credit, borrowing from family and friends, crowdfunding, and, depending on the industry, invoice factoring and purchase order financing, among others.
While investigating these various options, it is important for small business owners to inform themselves about the pros and cons before proceeding. For example, a personal line of credit may not offer enough funding and may have a high-interest rate attached.
Similarly, borrowing money from family and friends can create rifts in those relationships and may not be sufficient to help you meet your obligations.
Working with a business funding company such as Capstone Business Funding, LLC, and Capstone Capital Group, LLC can provide companies in particular industries with funding through invoice factoring or purchase order (PO) financing. Plus, Capstone’s funding is faster—and easier—than applying for a traditional line of credit at a bank. Capstone has had the pleasure of assisting numerous construction companies, distributors, manufacturers, government contractors, importers, and more, providing growth capital for their businesses.
At Capstone, we work quickly to help businesses maintain their momentum, meet their obligations, and grow. Don’t let a lack of capital slow you down. If you’re ready to investigate whether invoice factoring or PO financing may be a good fit for your business, contact Capstone Business Funding, LLC to learn more.