Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Lack of Credit Forces Many Small Business Owners to Finance with Personal Assets

02.03.2011
MU researcher says business owners can put their households at financial risk

Small businesses are seen as an important part of the American economy. These businesses often rely heavily on loans to stay afloat.

The recent economic recession has created a reduction in available credit for many small businesses, making it difficult for many businesses to operate.

Tansel Yilmazer, assistant professor in the personal financial planning department in the College of Human Environmental Sciences at the University of Missouri, says that lack of available credit has forced many small business owners to use their household savings or other personal assets to support their businesses, putting their personal assets at risk.

Tansel Yilmazer is an assistant professor in the personal financial planning department in the College of Human Environmental Sciences at the University of Missouri.

Yilmazer says that due to the present reduction in credit availability, small and family-owned businesses look to reduce their dependence on outside financing by utilizing two general strategies. The first strategy involves diminishing or eliminating the need for financing by reducing the cost of operations and carefully managing the cash flow of the business. The second type is to acquire finances by raising money from personal and other sources external to the business without resorting to bank loans.

Yilmazer says that businesses that use owner resources and delay payments for household expenses are the ones that typically report a need for further financing for their businesses. Because these business owners have not established relationships with banks, they may face problems obtaining future bank loans. Yilmazer says the recent recession has affected the direction of the resource flow from household to business and the owners might be putting their own assets at risk for the business.

“Recession has increased the risk of business failure,” Yilmazer said. “Since business is inherently risky, financing with owner resources would seem to extend that risk to the household in ways that owners may not be adequately considering.”

Yilmazer found that the use of financial resources is a two-way street in small and family-owned businesses, confirming that the family and business interact and resource exchanges occur in both directions. She says that while small businesses can provide income for households, owners need to be aware that financing a business from household funds opens the door for household assets to become susceptible to loss.

“Business ownership is an important household investment,” Yilmazer said. “Ownership may serve as a source of income and expenses as well as an investment vehicle, but it is not generally understood or considered as a household portfolio risk. Small and family businesses may be riskier than other investments because they are more susceptible to attrition.”

Yilmazer’s study was published in the Journal of Family and Economic Issues and was co-authored with Holly Schrank from Purdue University.

Nathan Hurst | EurekAlert!
Further information:
http://www.missouri.edu

More articles from Business and Finance:

nachricht Preferential trade agreements enhance global trade at the expense of its resilience
17.02.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Breakthrough with a chain of gold atoms

In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport

In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport

Im Focus: DNA repair: a new letter in the cell alphabet

Results reveal how discoveries may be hidden in scientific “blind spots”

Cells need to repair damaged DNA in our genes to prevent the development of cancer and other diseases. Our cells therefore activate and send “repair-proteins”...

Im Focus: Dresdner scientists print tomorrow’s world

The Fraunhofer IWS Dresden and Technische Universität Dresden inaugurated their jointly operated Center for Additive Manufacturing Dresden (AMCD) with a festive ceremony on February 7, 2017. Scientists from various disciplines perform research on materials, additive manufacturing processes and innovative technologies, which build up components in a layer by layer process. This technology opens up new horizons for component design and combinations of functions. For example during fabrication, electrical conductors and sensors are already able to be additively manufactured into components. They provide information about stress conditions of a product during operation.

The 3D-printing technology, or additive manufacturing as it is often called, has long made the step out of scientific research laboratories into industrial...

Im Focus: Mimicking nature's cellular architectures via 3-D printing

Research offers new level of control over the structure of 3-D printed materials

Nature does amazing things with limited design materials. Grass, for example, can support its own weight, resist strong wind loads, and recover after being...

Im Focus: Three Magnetic States for Each Hole

Nanometer-scale magnetic perforated grids could create new possibilities for computing. Together with international colleagues, scientists from the Helmholtz Zentrum Dresden-Rossendorf (HZDR) have shown how a cobalt grid can be reliably programmed at room temperature. In addition they discovered that for every hole ("antidot") three magnetic states can be configured. The results have been published in the journal "Scientific Reports".

Physicist Dr. Rantej Bali from the HZDR, together with scientists from Singapore and Australia, designed a special grid structure in a thin layer of cobalt in...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Booth and panel discussion – The Lindau Nobel Laureate Meetings at the AAAS 2017 Annual Meeting

13.02.2017 | Event News

Complex Loading versus Hidden Reserves

10.02.2017 | Event News

International Conference on Crystal Growth in Freiburg

09.02.2017 | Event News

 
Latest News

Stingless bees have their nests protected by soldiers

24.02.2017 | Life Sciences

New risk factors for anxiety disorders

24.02.2017 | Life Sciences

MWC 2017: 5G Capital Berlin

24.02.2017 | Trade Fair News

VideoLinks
B2B-VideoLinks
More VideoLinks >>>