Turmoil in the financial markets

Anybody looking at the news over the last week will know that the major financial instritutions are finding it difficult to stay afloat. What does this crises mean for entrepreneurs looking for finance to start their business or for fast growing businesses looking for finance to expand their activities?



When raising finance, financial institutions often require the lender to give some sort of security to enable the financier to get their capital back if the lender should fail to repay the loan. These types of loans are secured loans and they are at the heart of the current economic crises. If a financial institution gives the lender some finance backed by the lender's home (asset) for example, the financier rely on the value of the lender's home to remain more than the capital sum advanced. In the current market conditions the value of homes (asset) in the USA have fallen below the capital sums advanced to the lenders. If the lender is unable to pay the loan, the financial institution will step in and take possession of the asset and try and sell it to get back the principle amount of its loan.

When looking for finance for your business, the entrepreneur will have to satisfy the financial institution that the assets offered as security for the principle amount of the loan will maintain its value. You will also find that banks are hesitant to give 100% mortgages and they will start insisting on larger deposits from buyers.


At SA Business Plans we work with entrepreneurs to look at alternatives to secured funding. Secured funding tend to be cheaper than alternative funding sources but if unsecured funding is managed carefully it is a feasible alternative.