Small Business Plans Sought By Entrepreneurs
The entrepreneurial spirit is alive and well. Despite the lingering freeze on global credit conditions, it would appear that we are starting to see a thaw. Interests in small business plans has increased dramatically in the first six months of 2013 indicating that more people are deciding to follow their dreams instead of waiting in the queue for jobs that never come. Adversity always breeds creativity and innovation and while the current climate may seem rather bleak, the resurgence of interest in small business plans is a strong indicator that victims of the financial crisis are taking control of their own destiny.
Employment Landscape is Bleak
It is understandable really. Employment figures across the globe have never really recovered from the financial crisis despite the steady stream of rhetoric from central banks that economic conditions are slowly improving. I respectfully disagree given that the European Central Bank has just announced that unemployment across the region has risen to 12.2% (nearly 20 million unemployed).
In the US, total unemployment has dropped from 9.1% in April 2009 to 7.5% in April 2013 according to the National Bureau Statistic, but that figure bizarrely discounts nearly 2.3 million people who are unemployed but haven’t looked for work in the last 4 weeks! It is hardly a representative reflection of the true position or the average man on the street.
Similarly the UK unemployment figures in May 2013 edged up to 7.8% of the population and that is with interest rates at record lows and inflation at 5.2%, over 3% above the Bank of England target.
It is clear that these countries are running out of levers to pull to get people back into employment and steady the fiscal ship.
Small Business Set to Benefit
Economic austerity measures are a last gasp attempt to reduce fiscal deficits. The problem is these measures tend to stifle growth. When large corporations can’t grow they reduce their costs to preserve profitability. The easiest cost to cut is ironically the most important asset they have – their people.
From a macro economic perspective when governments run out of buttons to push to stimulate growth they must encourage it from other areas. This is where entrepreneurs and the green shoots of small business emerge, albeit in many cases driven by desperation. With a raft of banks announcing support for small business it is no surprise that interest in small business plans has increased.
The Need For Small Business Plans
While record low interest rates may indicate that it now is a great time to seek finance for a new business it must be noted that credit conditions for business loans have tightened significantly since the financial crisis. Banks and other lending institutions may have renewed appetite for small business initiatives in a bid to diversify their portfolio risk profile but they have now developed a heightened awareness for the risk involved. More specifically the return on equity parameters for banks has changed. There is no more easy cash for banks to on-lend to businesses and this means that analysis of the risks has become even more important, as have small business plans.
Emphasis on the financial analysis contained within small business plans has increased. It is not good enough to produce simple sales and cash flow forecasts anymore. Lenders want to see detailed cash flow analysis, particularly around working capital requirements in terms of debtor and creditor management and serviceability of debt. The reason for this is because banks have become much more targeted in the type of facilities they will look to provide to maintain their profit margin and they need this information to assess cash flow risk in your business.
Gone are the days of the “one size fits all” flexible credit line for your business. The diversification and segmentation of financial products means that the level of information required to secure a business loan has increased significantly. This places even more importance on an insightful small business plan.