Small Business Restructuring and Lending in 2012

The International Association of Business Mediation Consultants reports on the state of the small business economy. The big question many business owners are asking: “where is the recovery?”


April 21, 2012 – According the SBA, over 97% of businesses employ fewer than 100 people. With lending restrictions tightened for all but the most qualified companys, many business owners are finding the challenge of qualifiying for business loans, financing and mortgages at an all time high… combined with slowing cash flow, this has become a perfect storm for many small businesses.

In addition, while the current U.S. Administration is in full election mode, the numbers of full time jobs being filled are still anemic. According to Gallup, the unemployment rate is hovering at 8.5%. However, experts state that the only reason unemployment has come down somewhat is the large number of people dropping off the unemployment rolls. According to the Wall Street Journal, if you applied the 2007 number of people in the job force, today’s unemployment rate would be 11.8%.

Business owners face substantial levels of uncertainty – for example,

  • Questionable efforts (if any) at reforming the tax code
  • Cost issues with inflation and the question over the true cost of health care laws
  • The sovereign debt crisis in both Europe and the lack of action on fiscal restraint in the U.S.
  • The rather hard landing taking place in China which is leading to less buying of U.S. treasuries.

Small business owners have too little time to follow the day-to-day decisions and policies made by local, state and national governments. Many are too busy running their operations to look at the bigger picture. But they know they are experiencing slow cash flow, reductions in bank lines of credit and competitors offering loss leader sales to recruit customers.

Just a few examples:

  • The construction industry was hoping for a recovery in 2011-2012. However, the increased level of foreclosures are causing continued malaise as the backlog of underwater non performing homes are still being processed and expected to remain at high levels for the rest of 2012 and well into 2013.
  • A closely followed report that measures the health of U.S. manufacturers fell for the first time in six months, the Philadelphia Federal Reserve said Thursday. The bank’s index of business conditions dropped to 8.5 in April from 12.5 in March. That was below the consensus of economists polled by MarketWatch, who expected the index to slip to 10.8.
  • According to the April BLS (Bureau of Labor Statistics) the indexes for food, energy, and all items less food and energy all increased in March. The gasoline index continued to rise, more than offsetting a decline in the household energy index and leading to a 0.9 percent increase in the energy index. The food index rose 0.2 percent as the index for meats, poultry, fish, and eggs increased notably.

With the aforementioned concern over the increase of costs, many small business owners are facing either charging higher prices to their customers, which can lead to reduction of business, or reducing their margins. While this macro view may not be headline news for most business owners, the real world results are certainly affecting many companies that have hung on for the last 3 years awaiting for the assumed recovery. When business owners face short cash flow concerns, they are less likely to secure lending, at a time when it’s needed most. In many cases, this leads to a rapid downward spiral which takes the business owners by surprise, and often leads to paralysis.

When a business suffers short cash flow, both officers and employees are aware of the impending negative ramifications of a reduced cash position, which can lead to litigation from creditors, bankruptcy and the potential closure of an otherwise viable business.

IABMC - International Association of Business Mediation ConsultantsThe International Association of Business Mediation Consultants (IABMC), an organization made up of highly trained certified business restructuring & financing professionals, has been helping businesses going through these problems since 1994. Consultants walk businesses through corporate restructuring by reducing debts through debt mediation and providing access to sources of much needed capital, even if the company has been turned down for previous loans. Established in 1994, the organization has been featured in publications such as CNN, Money and the Los Angeles Times.

If your small business needs help resolving outstanding debts, raising funds for day-to-day operations, negotiating with creditors, etc., learn how a Valcor consultant can restructure your business to enable you to survive, grow and thrive.

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