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Wednesday, January 7, 2009

Top 5 Trends for Small Business Finance in 2009

Small Business Trends

January 7, 2009 By Scott Shane

The year 2009 will be a difficult one for small business finance. We’re in the midst of a recession that looks to rival, if not beat, the recession of 1980-1982 as the worst since the Great Depression. ...

Here are my top five trends for small business finance for 2009:

1. The amount of capital provided to small and start-up companies will continue to shrink

... Until the problems in the credit markets get resolved and the economy starts to grow again, it’s very unlikely that we will see a reversal of this trend. ...

2. Investors in start-up companies will continue to face a poor market for exiting from their investments

The IPO market is in a deep slump and there is little indication that it will emerge from that downturn in 2009. ... The market for acquisitions looks almost as bad. ... Until the economy gets moving again, the acquisitions market should stay in the doldrums.

3. Methods for internally financing companies will grow in popularity

... For instance, companies that help people tap their 401Ks to finance their businesses, and consultants that advise entrepreneurs on ways to bootstrap their growth, will grow in popularity.

4. Government officials won’t pay much attention to entrepreneurial finance

... Virtually of all the ideas for changes to entrepreneurial finance that had been floated previously – such as cutting capital gains taxes on start-ups and funding new high tech companies – will be driven off the agenda by a focus on fixing the problems faced by big businesses.

5. Attitudes toward financing start-ups and small businesses will change

During 2009, a new realism about entrepreneurial finance will continue to emerge. ... The shift toward greater realism about entrepreneurial finance will accelerate during 2009, bringing us back from the inflated views of recent years.

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About the Author: Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool’s Gold: The Truth Behind Angel Investing in America; Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By; Finding Fertile Ground: Identifying Extraordinary Opportunities for New Ventures; Technology Strategy for Managers and Entrepreneurs; and From Ice Cream to the Internet: Using Franchising to Drive the Growth and Profits of Your Company.