Small Company Finance

The most recent recession, also known as the Great Recession, continues to affect the economy in the United States. More specifically it has made it more difficult for smaller companies, which drive the economy, to gain capital. As a response, governments looking to boost their economies began to encourage entrepreneurs to start companies, however the prospect seemed less appealing as opportunities for capital dwindled. Thankfully, the growing sphere of Financial Technology, or FinTech, is working to solve this problem.

Innovators like Candace Klein, the Chief Strategy Officer of an online lender for small businesses called DealStruck, have moved into online finance sector in order to help small businesses raise money. Klein is of the belief that seed equity for small businesses is what keeps many of the businesses afloat when they are just starting out. It takes time for such companies to generate revenue, and capital helps keep them running through this process.

The issue with traditional venture capital avenues for small businesses is that most investors expect 10x returns. This is not feasible for most small companies. Additionally, crowdfunding is the first step toward building a community around a small business, which is what many startups are focused on today.

The credit gap is still a problem for small businesses as well. The Great Recession created a credit crisis that put stronger regulations on lenders. As a result, a small business owners had to be established and have good credit in order to obtain any type of financing. As an answer to this problem, online lenders emerged to create a less traditional way to finance businesses.

Online lenders such as DealStruck are willing to lend to small companies that have reached some kind of revenue consistency. They offer term loans and lines of credit, and have the ultimate goal of getting a company’s finances to the point where a bank can take over. This gives small companies more options for their financing, and it allows them to research and choose from an array of lenders instead of being forced to take more traditional, high cost, short term methods.

Small businesses are invaluable to our economy. They contribute to a large percentage of job growth and bring growth to struggling communities by funneling their money back into said communities. With a lack of options with which to gain capital, however, growth of smaller companies would remain stagnant. Thankfully, online lending has become a viable option for small business finance.