As sequestration kicks in, where will businesses turn for loans?

After Washington politicians failed agree on a budget that would effectively cut spending and bring down the national debt by March 1, $85 billion in federal spending cuts were automatically implemented. This sequester, part of the fiscal cliff agreement that was resolved in January, aims to reduce government spending across the board, but many are wondering how it will impact business financing. 

The blanket cuts the sequester mandates will slash funding to all government agencies and organizations, including the U.S. Small Business Administration (SBA), which many entrepreneurs rely on in order to receive startup funding or grow their enterprises. In addition, some expect sequestration will shock the nation's economy, which could result in stricter lending standards and risk management techniques, rendering small-business owners unable to obtain financing from larger banks. 

How small-business owners can deal with the sequester 
Entrepreneurs often have a hard time obtaining business loans for their growing companies or innovative startups, and the sequester could only make it harder for them to receive the funding they seek. With the budget cuts now in effect, traditional lenders such as large banks may be even less willing to finance unusual enterprises or operations they find too risky in the current economic climate. 

However, there are still ways entrepreneurs can grow their businesses or gather the funds to make their dreams of starting a company a reality. As the sequester kicks in and begins to impact the SBA loan programs and the economy in general, more may turn to alternative lenders for business funding. 

Where to turn for lending 
Small-business owners may begin looking to credit unions, friends and family, crowdfunding or small and mid-sized local banks as alternative ways to receive business loans. These providers typically can provide more lending opportunities to entrepreneurs running innovative startups who are unable to gather loans elsewhere. 

In addition to being more flexible with business lending, small and mid-sized local banks can also offer growing businesses more unique and personalized cash management options. More opportunities, custom service solutions and a more inviting atmosphere can all be big benefits for a small-business owner looking to enhance operations and ensure company finances are in good shape at all times, especially as the future of the economy remains uncertain.

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