Venture capital among loan alternatives for 2012

1/3/2012

Bank loans in 2012 will likely remain consistent to 2011 trends - large banks will provide less funding while smaller community banks and credit unions will assist entrepreneurs, according to Fox Business.

"The disparity is not going away any time soon," Ami Kassar, CEO of small business lending consulting firm MultiFunding told the news source. He added that community banks are better equipped to "handle the nuances" of small business loan underwriting, while bigger banks generally work only with the most creditworthy borrowers.

However, Rohit Arora, CEO of online credit marketplace Biz2Credit is confident that the market for small business lending is going to be "much better" in 2012, as loan alternatives are sprouting up.

For example, crowdfunding involves a network of people who pool their money and other resources together to support startup efforts. Self-directed IRA firms let entrepreneurs roll over retirement savings into new franchises. SBA loans remain popular because the government guarantees up to 85 percent of the loan in the event of a default.

Lastly, venture capital loans are growing as well, loaning $21.2 billion in 2011 - up from $19.7 billion in 2009. According to the SBA's website, VC loans are different because they focus on young, high-growth companies, invest equity capital rather than debt and take higher risks.