The Small Business Financing Trends of 2022

There are many reasons to be optimistic about a prosperous 2022. Learn why lenders and small business owners are optimistic about financing.

  • Although small business owners suffered devastating losses in 2020, there are still reasons to be optimistic about 2022.
  • Lenders and credit card issuers are now open for business, which means that funding will be more accessible.
  • Technology will continue to play a significant role in helping small-business owners manage their cash flow.
  • This article is intended for small business owners who are interested in the financial trends for 2022.

The Small Business Financing Trends of 2022 Despite the destruction caused by the COVID-19 pandemic there are reasons to be optimistic for small businesses heading into 2022. A vaccine is being developed, another round is of the Paycheck Protection Program will be launched, and lenders are available again.

Capital One recently conducted a survey of small business owners. 67% said they are confident that their businesses will be back to pre-pandemic levels in 2022. 60% of small-business owners believe that the U.S. economic outlook will improve in the coming year.

“People are feeling more optimistic in 2022,” Sameer Glati, President and COO at Plastiq, told us. “Things will reopen and grow again in the third quarter.”

However, this does not mean that small business owners will see their business return to normal. Many small businesses were forced to shut down permanently after the pandemic. Millions of companies were affected. But, those that survived the pandemic and are still able to survive will be able to access more funding optins than was available in 2020.

Increased credit lines by credit card issuers

Starter loans and business credit cards. The United States credit card companies and lenders responded to the pandemic by cutting credit limits and slowing lending. Many small businesses needed credit to continue their operations, and this made it impossible for them to get credit.

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“In March, traditional credit providers experienced a huge knee-jerk reaction. They pulled back. Gulati stated that loans became very difficult to obtain, which increased the risk of business failures. “It was the first occasion in credit card industry when line reductions occurred in as little as a few days or weeks.”

It took banks and credit cards companies months to respond to the 2008 and 2009 recessions. However, technology advancements and integration with bank accounts makes it easier to spot red flags and take action in 2020.

Credit card companies will be better equipped to assess COVID-19 risk once 2020 is over and they will be more comfortable lending credit.

Gulati stated that progressive card issuers are increasing their lines. “Our credit issuing partners tell us that they have big plans for 2021. They come to us to help them figure out when it’s safe and how to increase lines again.”

However, credit availability is not the same across all sectors. Gulati stated that credit lines are rising for those sectors that have remained strong during the pandemic, such as e-commerce and healthcare.

Open to business: Lenders

In 2022, not just business credit card issuers will be open for business. Brock Blake, CEO of Lendio, stated that banks, credit unions and online lenders are all able and willing to lend cash to small-business owners.

He acknowledged that there are stricter requirements in certain industries, and lenders have an appetite for lending. Lendio loans that are profitable include those that are cash flow, asset-backed and Small Business Administration loans, according to the executive.

Blake stated that the SBA will increase the guarantee to 85% to 90%. “That will increase the confidence on lenders’ part” to extend an SBA loan.

Small businesses will be served by more lenders if they have access to liquidity. Business owners with excellent credit ratings will find borrowing much cheaper. While banks and credit unions will still play a part in business lending, alternative lenders as well as fintechs will likely be the main issuers in loans in 2022. Investors don’t get much return outside of the stock market, and they are more willing to lend their money if there is less COVID-19 uncertainty.

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Matthew Gillman, CEO at SMB Compass, stated that “a lot of money has been flooding the non-bank lending markets because bond yields have fallen,” Alternative lenders will find the new year exciting. There will be plenty of liquidity, but not in the form banking financing.

Another round of PPP is needed to make it through winter

The pandemic has disproportionately affected small business owners, especially in the hospitality and retail industries. The Paycheck Protection Program was established by the government to assist struggling business owners. Small business owners could get forgiven loans if they used the funds to keep their workers on the payroll. It was a popular program that was quickly exhausted.

Since then, coronavirus cases have risen dramatically and many states such as California are under lockdown. More aid is now on the horizon, after months of negotiations. Congress approved new legislation last week, authorizing $284 billion in PPP loans for small businesses. A new PPP loan can be applied for by small business owners who have received a PPP loan, but had their sales drop 25% or more.

Blake stated that “Our hope and expectation was that Washington would cease playing politics and instead focus on small businesses who require another round of PPP in order to get through the winter.” It would be a long, dark winter if it failed. There would be many more business closings than we have seen so far.

Technology plays an important role in the management of finances

The pandemic taught business owners the importance of adapting and pivoting in close to real-time to customers’ needs and demands. Physical retailers couldn’t resist moving their business online when many cities shut down during the initial days of the pandemic.

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In 2022, technology that enabled them to do this with ease will still play a significant role in their operations. Cloud-based software is available to help businesses set up e-commerce websites, accept contactless and self-service orders, and manage their online payments. This was true during the credit card pandemic, when POS providers and ecommerce platform operators were in high demand. This trend will not change in 2022.

Business owners will still have access to low-cost software to streamline their operations and improve their bottom line, such as artificial intelligence that predicts when bills will be paid and POS systems that automatically track and reorder inventory. Gulati stated that the pandemic created new opportunities and has accelerated the adoption of technology by traditional business models.

The new mantra is “Do-it-together”.

Although DIY is a common practice among business owners, many realize they could benefit from the assistance of a partner. They can do it easily and cheaply thanks to technological advances.

Let’s take accounting as an example. Ben Richmond, country manager of Xero accounting software said that business owners now embrace a “do it-together” approach to certain business processes, such as marketing and accounting. To get through the pandemic, they are using technology and the expertise from other businesses. They are more conscious of the need for proactive cash flow and funding. Reacting in such an extreme environment is not an option.

Richmond stated that business owners do not have to be bookkeepers. They need to feel in control and know where they are, even when the story isn’t good. We’ve noticed an increasing trend in ‘doing things together’ to help them navigate the minefields.

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