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 Microtechnology industry is hiring – positive developments of past years continue
09.04.2018 | IVAM Fachverband für Mikrotechnik

nachricht RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

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: Powerful IT security for the car of the future – research alliance develops new approaches

The more electronics steer, accelerate and brake cars, the more important it is to protect them against cyber-attacks. That is why 15 partners from industry and academia will work together over the next three years on new approaches to IT security in self-driving cars. The joint project goes by the name Security For Connected, Autonomous Cars (SecForCARs) and has funding of €7.2 million from the German Federal Ministry of Education and Research. Infineon is leading the project.

Vehicles already offer diverse communication interfaces and more and more automated functions, such as distance and lane-keeping assist systems. At the same...

Im Focus: Molecular switch will facilitate the development of pioneering electro-optical devices

A research team led by physicists at the Technical University of Munich (TUM) has developed molecular nanoswitches that can be toggled between two structurally different states using an applied voltage. They can serve as the basis for a pioneering class of devices that could replace silicon-based components with organic molecules.

The development of new electronic technologies drives the incessant reduction of functional component sizes. In the context of an international collaborative...

Im Focus: LZH showcases laser material processing of tomorrow at the LASYS 2018

At the LASYS 2018, from June 5th to 7th, the Laser Zentrum Hannover e.V. (LZH) will be showcasing processes for the laser material processing of tomorrow in hall 4 at stand 4E75. With blown bomb shells the LZH will present first results of a research project on civil security.

At this year's LASYS, the LZH will exhibit light-based processes such as cutting, welding, ablation and structuring as well as additive manufacturing for...

Im Focus: Self-illuminating pixels for a new display generation

There are videos on the internet that can make one marvel at technology. For example, a smartphone is casually bent around the arm or a thin-film display is rolled in all directions and with almost every diameter. From the user's point of view, this looks fantastic. From a professional point of view, however, the question arises: Is that already possible?

At Display Week 2018, scientists from the Fraunhofer Institute for Applied Polymer Research IAP will be demonstrating today’s technological possibilities and...

Im Focus: Explanation for puzzling quantum oscillations has been found

So-called quantum many-body scars allow quantum systems to stay out of equilibrium much longer, explaining experiment | Study published in Nature Physics

Recently, researchers from Harvard and MIT succeeded in trapping a record 53 atoms and individually controlling their quantum state, realizing what is called a...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

In focus: Climate adapted plants

25.05.2018 | Event News

Save the date: Forum European Neuroscience – 07-11 July 2018 in Berlin, Germany

02.05.2018 | Event News

Invitation to the upcoming "Current Topics in Bioinformatics: Big Data in Genomics and Medicine"

13.04.2018 | Event News

 
Latest News

In focus: Climate adapted plants

25.05.2018 | Event News

Flow probes from the 3D printer

25.05.2018 | Machine Engineering

Less is more? Gene switch for healthy aging found

25.05.2018 | Life Sciences

VideoLinks
Science & Research
Overview of more VideoLinks >>>