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 The RWI/ISL-Container Throughput Index started off well in 2018
22.02.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

nachricht RWI/ISL-Container Throughput Index ending 2017 on a positive note
24.01.2018 | 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: Attoseconds break into atomic interior

A newly developed laser technology has enabled physicists in the Laboratory for Attosecond Physics (jointly run by LMU Munich and the Max Planck Institute of Quantum Optics) to generate attosecond bursts of high-energy photons of unprecedented intensity. This has made it possible to observe the interaction of multiple photons in a single such pulse with electrons in the inner orbital shell of an atom.

In order to observe the ultrafast electron motion in the inner shells of atoms with short light pulses, the pulses must not only be ultrashort, but very...

Im Focus: Good vibrations feel the force

A group of researchers led by Andrea Cavalleri at the Max Planck Institute for Structure and Dynamics of Matter (MPSD) in Hamburg has demonstrated a new method enabling precise measurements of the interatomic forces that hold crystalline solids together. The paper Probing the Interatomic Potential of Solids by Strong-Field Nonlinear Phononics, published online in Nature, explains how a terahertz-frequency laser pulse can drive very large deformations of the crystal.

By measuring the highly unusual atomic trajectories under extreme electromagnetic transients, the MPSD group could reconstruct how rigid the atomic bonds are...

Im Focus: Developing reliable quantum computers

International research team makes important step on the path to solving certification problems

Quantum computers may one day solve algorithmic problems which even the biggest supercomputers today can’t manage. But how do you test a quantum computer to...

Im Focus: In best circles: First integrated circuit from self-assembled polymer

For the first time, a team of researchers at the Max-Planck Institute (MPI) for Polymer Research in Mainz, Germany, has succeeded in making an integrated circuit (IC) from just a monolayer of a semiconducting polymer via a bottom-up, self-assembly approach.

In the self-assembly process, the semiconducting polymer arranges itself into an ordered monolayer in a transistor. The transistors are binary switches used...

Im Focus: Demonstration of a single molecule piezoelectric effect

Breakthrough provides a new concept of the design of molecular motors, sensors and electricity generators at nanoscale

Researchers from the Institute of Organic Chemistry and Biochemistry of the CAS (IOCB Prague), Institute of Physics of the CAS (IP CAS) and Palacký University...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

2nd International Conference on High Temperature Shape Memory Alloys (HTSMAs)

15.02.2018 | Event News

Aachen DC Grid Summit 2018

13.02.2018 | Event News

How Global Climate Policy Can Learn from the Energy Transition

12.02.2018 | Event News

 
Latest News

Basque researchers turn light upside down

23.02.2018 | Physics and Astronomy

Finnish research group discovers a new immune system regulator

23.02.2018 | Health and Medicine

Attoseconds break into atomic interior

23.02.2018 | Physics and Astronomy

VideoLinks
Science & Research
Overview of more VideoLinks >>>