Like the saying goes, “The only things certain in life are death and taxes.” Unfortunately, small businesses know this saying all too well.
Unlike employees who look forward to their refund every April, small businesses loath the approaching spring, knowing they will have to pay Uncle Sam its share of their profits. Each year, small businesses struggling to turn a profit in an increasingly competitive business environment must pay taxes in order to keep their doors open.
With dwindling profit margins and tightened lending The Thing To Sell For A Small Business restrictions, however, many small business owners find themselves between a rock and a hard place when it comes time to pay the tax man. Although a business may have steady sales and revenue or thousands of dollars in inventory, banks and traditional lending institutions simply aren’t handing out small business loans like they were in year’s past, leaving small business owners with few funding options to pay their tax bill.
Thankfully, peer-to-peer lending, or social lending, has solved this growing dilemma. These modern social lending marketplaces have connected millions of borrowers with individual investors. Borrowers receive low-interest, fixed-rate loans that can be paid off in two to five years, while investors are able to benefit from decent returns in an economy with sinking bond and savings rates.
Thus, it’s a win-win situation for both small business owners in need of immediate funding and investors looking to make a small profit while helping others.
From Desperation to Exultation: One Man’s Venture into Peer-to-Peer Lending
John Mitchell is an Ohio-based small business owner who found himself in such a predicament just last year. As the owner of the only hardware store in a small town, John’s store flourished the first few years it was open.
After getting his inventory levels, pricing models, and management just right, he decided to expand his business by opening a second location in a neighboring town. John sunk all of his profits into opening his new store, which meant he was short on funds come tax time. However, knowing the success of his business, he thought he would simply get a small loan from the bank that housed his accounts and provided him with the initial loan he used to launch his business four years earlier.
Unfortunately, he witnessed first-hand the effect the recession has had on lending regulations as the banker he’s known for years denied his loan application. If he couldn’t get a loan there, where could he?