Our View: Businesses need second boost
Wednesday , March 26, 2014 - 2:10 PM
In today’s still-uncertain economic environment, many small businesses, struggling to remain viable as they grow, encounter a “valley of debt” several months after the business is started. The initial cash is spent, and more money is needed for stage two of the business.
It’s important that revenue opportunities, small loans to new firms still establishing a foothold, are available. If not, many great economic ideas will wither and die.
After the initial capital for a business has been started, and the funding from family, friends and other sources — whether banks or grants — has been exhausted, a scarcity of cash develops. This is a critical for many small businesses. The business has long-term potential, but the short-term money is lacking. Unfortunately, many businesses do not survive this “valley of debt.” They have prospects to grow a successful business, and contribute to a community’s economic growth through job creation and tax revenue, but they don’t survive the early challenges beyond the start-up phase.
Banks and other financial institutions are not always fond of providing small credit loans, but we think it would be a sensible idea to establish a consortium of financial institutions to set up a credit fund — perhaps $10 million — for still-new businesses that need a second infusion of capital to survive. It would be a small investment, paid back with interest by the young companies, that would pay considerable future dividends for the consortium, the businesses, and the community.
Consistent economic growth, and the resulting jobs and tax revenue that result, are essential to long-term and consistent economic well-being. It’s essential that capital be available to keep young businesses healthy.