subject: Is the Recession Truly Over? [print this page] Is the Recession Truly Over? Is the Recession Truly Over?
According to The National Bureau of Economic Research (NBER) the Great Recession ended in June 2009, but does that mean "back to business as usual"?
The recession that began in December 2007 and lasted 18 months is the longest and deepest downturn for the U.S. economy since the Great Depression. Fears of a double-dip recession are still alive, especially when unemployment remains high and the housing market continues to be in a slump. Why does there seem to be a huge gap between what the NBER offers and what seems apparent today?
Perhaps this question has already been answered, but no one was listening. Robert Pollin, an economics professor at University of Massachusetts-Amherst states, "The single most important reason for the failure of the recovery to take hold thus far is that private credit markets are locked up, especially for small businesses." The reality for many small businesses that may have qualified for credit under the old norm is that they do not qualify for credit under the new norm.
We pointed out this paradox in our own August 27th article "$40B in Small Biz Loans Disappears". How can the recovery be sustained if small businesses cannot access the working capital needed to support renewed growth? Small business is the life-blood of a strong economy. So as long as small business is challenged by access to working capital, then we can expect a challenging economic recovery as well as a hindered job market growth.
It is critical that businesses acquire a funding source that is readily available and dependable. Factoring (also known as Accounts Receivable Financing) is an often overlooked choice for businesses trying to participate in the recovery. This form of financing is not widely known, but allows businesses to capitalize on the power of their outstanding invoices. Factoring can be a valuable mechanism to turn business invoices into immediate cash, enabling them to fund business operations.
Funds obtained from a factoring provider can be used for the same business purposes that one might use cash borrowed from a traditional business lender such as a commercial bank. Instead of incurring debt by borrowing from a traditional lender, business accounts receivable can be converted immediately to cash under a factoring arrangement, essentially, leaving the business debt free. In many cases, under an inter-creditor agreement, a factoring provider can provide funds to a business already indebted to a commercial lender.
Factoring allows the small business owner to retain control of their company and gives them the ability to grow quickly or at a moderate pace. It is all about control and cash flow management. Savvy business owners use the extra cash to take quick-pay discounts from suppliers by paying early. With the right financial strategy, factoring can also provide long term cash flow management, not just a quick fix.
Factoring has become an important small business financial tool in the midst of this uncertain economic environment, as it has proven to be a cost effective alternative for working capital to fuel business growth and to timely pay sensitive cash obligations.
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