2011 has been an interesting year as the business financing market place continues to redefine itself since the beginning of the 2008 recession.
It was clear this year that business financing in general was starting to become more available and from more sources, but it also became clear that things were no where near where they were prior to 2008.
In fact, there have been so many changes in the dynamics of global finance, that it seems unlikely that things are going to return to what we got conditioned to with respect to business financing practices for the better part of two decades.
So my first prediction is that the world of business financing is going to continue to evolve in different directions that are going to be more in keeping with lender and investor risk management and in greater search for value.
One of the things I really noticed in 2011 is that there is a lot of money out there looking for a home, especially in the form of business financing in established and relatively secure economies. With all the global economic chaos of the past year, you may justifiably think that there are no sure bets anywhere in the world these days as the global financial network is highly intertwined across borders.
That being said, money is attracted to the best bets and the greatest opportunity to attract value.
And because of the recent recession, there has never been a better time to acquire assets at greatly discounted prices which is of great interest to those that hold and control the money supply.
My second prediction is that there is going to be lots of money available for the true value creators in the economy.
What this also says on the flip side is that speculative money is going to remain hard to find as lenders and investors are still trying to recover or still dig themselves out of the down turns in their portfolios.
The smarter money is on the smarter bets and for those individuals who can create the “add money and stir” type scenarios where all the elements of profitability and risk management are well thought out are going to likely have a sorts of financing options available to them.
Predication number three is that there are going to be more and more alternative forms of financing with unique risk management models out in the market place as sources of money continue to work towards filling the large gap that remains in what I will describe as the business sub prime lending market.
This is good and bad news in that many of these alternative sources can be quite anonymous and perhaps invisible in terms of their profile and working model as compared to the highly branded commercial financing entities that remain largely removed from higher risk opportunities.
The challenge here is while there are legitimate alternative sources out there, there is a lot of fraud and fee collecting entities as well who make more money collecting fees as they do on fund actually lent or invested.
Which leads into predication number four…more and more enders and investors are going to be charging up front due diligence fees to review financing and investing opportunities.
In the past, up front due diligence fees was something you would come across occasionally, but now we are seeing this more and more.
And what it amounts to is that business owners are going to have to pay for the time of money lenders and investors to review their requests and take their chances as to whether or not they actually get funding.
The process of business financing is becoming more and more of a hit and miss process as lender and investor criteria remains constantly influx, reducing any accurate predictability of what any one source of money may be able to do for you at any given point in time.
So in order to kiss some frogs, its going to cost money, especially for anything that does not fall under the lending/funding requirements of the “A” institutional lenders who may not charge an upfront due diligence fee, but many times still charge a commitment fee, which can basically work out to the same thing…it just happens later in the process when your hopes have been raised.
My final prediction is that business owners are going to be slow to react to the new world order of business financing and as a result there is going to be more upheaval in the economy as capital will fail to be in place when its supposed to be causing transactions to fail and businesses to collapse as business owners and managers hold on to old lending and investing axioms that no longer apply.
This creates tremendous opportunity for those that understand the change in the business financing markets and are either taking the time to educate themselves towards more effective business financing strategies going forward, and/or are prepared to invest in the experience of those that can help them navigate the landscape more effeciently.