Small business owners have never had it easy when it comes securing financing. But there’s no doubt things are worse now than ever. Ed Harycki, CEO at Swift Financial, a small business lender that launched in May 2007 says:
We hear credit is tough and getting tougher. We are seeing much higher quality customers seeking out our services. And a number tell us they’ve been with a bank for ten years and they just aren’t lending right now.
But this gap, of course, creates an opportunity for entrepreneurs like Harycki. Matt Harris, managing general partner at venture capital firm Village Ventures http://www.villageventures.comwho specializes in financial services, says he has focused in the last three years on startups that cater to the small business crowd. So his firm has invested in Swift, which uses techniques favored by the credit card companies to make quick decisions on lines of credit to small companies, as well as in On Deck Capital, a lender to small retailers.
So will the current credit crunch yield an explosion in new companies looking to lend to entrepreneurs? Maybe. But Harris says while he expects more players to enter the market, that is unlikely to be enough to offset the void created by the big banks pulling in their horns.
And the tight credit markets create another problem of course. Harris says there are plenty of predatory lenders out there looking to exploit the tough financing market. Yet another headache for entrepreneurs in an already difficult environment.