Firms Turn to Riskier Financing

Published on February 21, 2012 by Jose Pagliery, CNN Money


New York (CNNMoney) — Banks denying small businesses loans keep demanding what they can’t have – collateral – and the disconnect is forcing firms to look elsewhere.

Small businesses are caught up in the collateral crisis, as banks continue to focus on healthy credit scores and tangible assets like property, two of the hardest hit casualties of the recession.

“A lot of the traditional collateral that entrepreneurs used to have disappeared,” said Ami Kassar, a financing consultant and CEO of MultiFunding.

It’s a quandary long in the making. The landscape of U.S. small firms has changed from manufacturers to service companies, yet banks keep demanding collateral like equipment and land. The chasm has produced a breeding place for others, according to FOCUS investment banker John Slater.

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