Small business debt continues to exceed pre-pandemic levels as business owners fight to keep up with payments and explore relief options.
The Growing Struggle: Small Businesses Grappling with Debt
June 27, 2023, Houston, Texas—Leading invoice funding company Charter Capital says that the aftermath of the coronavirus pandemic has left many small business owners struggling under the weight of massive debt. The burden of debt funding and business loans has grown to be a serious barrier as they work to recover from the economic slump. The financial health of these businesses has been under tremendous pressure as a result of the burden of monthly payments and the unpredictability of cash flow. Additional coverage of the topic can be found in “Good Debt vs. Bad Debt for Small Businesses: What’s the Difference?”.
For small business owners, access to capital is still a major challenge. Getting a business loan might be difficult due to the tightening standards of traditional lending institutions, especially for those who are already saddled with corporate debt. Many business owners have turned to using short-term loans or business credit cards, which frequently puts them in a loop of increasing debt.
Small Business Debt Statistics
The release comes on the heels of a Federal Reserve report, which indicates total debt of nonfinancial businesses grew at an annual rate of more than six percent from 2017 to 2021. The latest Small Business Credit Survey echoes the sentiments, noting that the share of small businesses with debts totaling more than $100,000 presently sits at 40 percent, up from 32 percent in 2018. Amid these financial issues, approximately two million small businesses are struggling to make debt payments, finding it to be a major financial challenge. Many business owners are looking at ways to properly manage their debt while they seek debt relief.
Small Businesses’ Evolving View on Debt
“The way small-business owners view debt is changing,” explains Gregory Brown, Co-founder and Executive Manager at Charter Capital. “Between existing debts and concerns about the economy, many are doing everything they can to get their debts paid off or avoid taking on debt to begin with.” Before the covid-19 pandemic, taking on debt might have been a common strategy for expansion or investment. However, the uncertainties brought on by the pandemic have prompted a paradigm shift in how entrepreneurs approach their business finances.
While some debts, such as mortgages and those accrued to grow a business or procure an asset can be helpful while building credit, others, such as credit cards and short-term loans, often bury businesses in fees and can be difficult to pay off.
A Debt-Free Funding Alternative: Invoice Factoring
Brown gives a nod to the Small Business Credit Survey, which indicates more than 681,000 small businesses applied for funding in the past year with the hopes of refinancing or paying down their debt. He says that Charter Capital is seeing a similar trend in relation to applications for invoice factoring, a funding solution that provides businesses with upfront cash for their unpaid B2B receivables. Because the client responsible for the invoice is the one paying the balance, the business itself doesn’t accrue debt.
“Because it’s debt-free funding, it’s a favorite for those trying to avoid taking on debt as well as those trying to get out from under their existing debts,” Brown says. “Plus, most businesses qualify, and it works across a variety of industries, so we’ve been able to help a lot of small businesses strengthen their financial standing.”
About Charter Capital
Headquartered in Houston, Texas, Charter Capital has been a leading provider of business funding solutions for the B2B sector for more than 20 years.
As a reputable debt relief company, Charter Capital is aware of the various financial difficulties that small businesses confront, particularly in the wake of the coronavirus pandemic.
Committed to offering debt management plans and debt-free financing alternatives, Charter Capital takes a customer-centric approach to help businesses across various industries secure the working capital necessary to manage daily needs and achieve sustained growth.
Their competitive rates, fast approval process, and same-day funding set them apart as a reliable partner in navigating financial hardships. With a wealth of experience and a deep understanding of the complexities of business finances, Charter Capital continues to empower small businesses to overcome debt hurdles and unlock their full potential.
To learn more about Charter Capital’s debt management plans and the benefits of invoice factoring, visit charcap.com or call 1-877-960-1818. Take the first step toward a brighter financial future with Charter Capital’s trusted support and expertise.