There are reasons to hope for a prosperous 2021. Find out why small business owners and lenders are optimistic about business financing. Small business owners were dealt devastating blows in 2020 but there are reasons to look to 2021 with optimism. Credit card issuers and lenders are open for business again, which means funding will be easier to come by. Technology will continue to play an important role in helping small business owners manage cash flow.
This article is for business owners who want insight into the small business financing trends of 2021. Despite the devastation brought on by the COVID-19 pandemic, there are reasons for small businesses to be optimistic heading into 2021: A vaccine is rolling out, another round of the Paycheck Protection Program is coming and lenders are open for business again.
Capital One recently surveyed small business owners and found that 67% expressed confidence that their businesses will return to pre-pandemic operations and revenue in 2021. Meanwhile, 60% of small business owners think the outlook for the U.S. economy will be favorable in the new year.
“Folks are feeling a lot more optimistic in 2021,” Sameer Gulati, President and COO of Plastiq told business.com. “Things should start reopening and growing again in the third or fourth quarter.”
That’s not to say business will be back to normal for the typical small business owner. Millions of enterprises have been hurt during the pandemic, many forced to close their doors forever. But, the ones that have been hanging on and surviving will have more financing options than were available in 2020.
Take business credit cards and loans for starters. As soon as the pandemic hit, U.S. lenders and credit card companies reacted by slashing credit limits and slowing down lending. That made a bad situation untenable for many small businesses who needed access to credit to keep operations going.
“Sometime in March, traditional credit providers had a massive knee jerk reaction and pulled back hard. Loans became extremely hard to get, increasing the rate of business failures,” said Gulati. “It was the first time in the credit card industry that line reductions happened in a matter of days and weeks.”
During the recession of 2008 and 2009, it took banks and credit card companies months to react, but advances in technology and integration with business bank accounts make it much easier to see the red flags in 2020 and react.
As we put 2020 behind us, credit card companies are better able to gauge COVID-19 risk and are more comfortable extending credit.
“We’re starting to see more progressive card issuers increase lines again,” said Gulati. “Credit issuing partners are telling us they have big plans for 2021 and come to us for help figuring out when it’s safe to lend and increase lines again.”
But, increased credit isn’t available across the board. Gulati said credit lines are increasing for sectors that have held up during the pandemic including e-commerce, healthcare, construction, and professional services.
Key takeaway: Credit card companies were quick to lower credit lines and hold back lending, but with less uncertainty about the COVID-19 impact, they are increasing credit lines and issuing credit again.