Small Businesses Face Higher Borrowing Costs

Small businesses face rising borrowing costs.  From credit cards to bank loans, the businesses that usually provide the job growth following recessions are under undue pressure with the lack of affordable capital.  This is unfortunate. Small businesses need capital to fund expansion, to underwrite innovation, and to hire people.

One traditional source of capital has been the housing market.  Home equity lines of credit, re-fis, etc. traditionally have provided capital to these businesses, many of which are home-based.  But this source has dried up after the housing crisis.

Small businesses likely will need to turn to private equity and venture capital sources for future capital.  These private sources likely will grow in coming years as even larger PE firms begin funds to invest in smaller businesses with potentially higher growth rates and returns.

— Steve Odland

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