The “5 in Five” podcast is a new, monthly addition to the Small Business Edge podcast. In the new format, I ask guest experts five questions in five minutes on one topic. Andrew Sherman is the first guest expert for our “5 in Five” podcast; the topic we chose for him was small business financing. Below are highlights from the podcast.
Brian Moran: What is the state of small and midsize business financing in 2022?
Andrew Sherman: SMB financing is robust today. There's a lot of money that has been on the sidelines. Investors who were worried about the impact of COVID and other things are now coming back onto the playing field. One area of SMB financing where we have seen incredible progress over the last 18 months is on access to early stage and growth capital for minority and women owned small and mid-size businesses. It is long overdue and I'm very excited to see the trend continue.
Brian: What's the potential impact for SMB financing given the projected rising interest rate environment this year?
Andrew: There might be up to four interest rate adjustments at a quarter point each in 2022. However, in terms of actual cost to capital and the impact on a small business borrower, it is minimal compared to other priorities facing business owners. A more important focus would be improving access to capital, not necessarily improving cost of capital right now.
Brian: Why is today a good or bad time for business owners to make capital investments in their companies?
Andrew: I think it's an absolutely great time, and a critical time, for business owners to make capital investments in their companies. Business owners need to differentiate themselves; they need to restate their value propositions, and they need to invest in technology. Take money that you would spend on rent, utilities and in-person events (assuming that your employees are working remotely), and reinvest the money into customer driven databases, customer driven service training.
Brian: What does the economy for small and mid-sized companies look like six months from today?
Andrew: Six months from today, our economy will face a critical inflection point. The next six months should be strong. But we have four or five issues—inflation, supply chain issues, COVID, workforce shortages, and geopolitical threats—that are looming. If they are resolved by summertime, we could see a very strong second half of the year. If those five issues are still looming, it could be a dark fall and winter for business owners.
Brian: Last question. What advice would you give to business owners today as they navigate through the next 90 days?
Andrew: I would give business owners four suggestions. The first two are: be resilient and adaptable. If you don't continue to tweak your business model and your target markets, you run the risk of failure. Third, take NOTHING for granted. My last suggestion, and probably my biggest concern of many business owners, is take care of your employees. In the past four months, 14 million people quit or moved jobs. Some are leaving the workforce permanently; others are leaving temporarily. Employers need to better understand why they are leaving, where are they going, and what do they want to do. What is it about their current job that they don’t find compelling?
If I was a business owner today, I'd be thinking about my current employees and how do I keep them. I would also look at my company’s value proposition and is it attractive enough to recruit the best employees for my business.
Brian: Thanks Andrew, as always, for your insightful answers and advice. I know business owners appreciate having you in their corner.