The following article appeared online in The Wall Street Journal  on July 7, 2014

Borrowing may not be the best way to solve financial woes.


The head of the U.S. Small Business Administration, Maria Contreras-Sweet, made a bold statement this week in an interview regarding the state of small-business lending and the SBA’s role in aiding small businesses. Ms. Contreras-Sweet said “the counseling is almost more important than the lending.”

What she is referring to is something I encounter on a regular basis as well. Small-business owners often believe that loans are a remedy for nearly all business problems. However, a loan isn’t always the best answer. In fact, it can oftentimes worsen the problems small-business owners are facing by putting them even deeper into debt when that may be unnecessary.

By acknowledging the fact that many small-business owners use loans as a crutch or a Band Aid for lingering business problems, Ms. Contreras-Sweet is taking a definitive step toward helping small businesses across the country grow responsibly and with purpose. As a co-founder of a bank servicing small businesses, she knows firsthand how many discussions with business owners seeking financing progress.

When small-business owners call my loan-brokerage firm seeking capital, the first thing that we ask is why they need the money. You’d be surprised that most can’t directly answer this question. From our experience, many get in a tough spot financially and think that they need a loan to fix their problems instead of looking at the true root of the problem.

A few months ago, I spoke to an owner who was in a cash crisis. He thought that he needed a large loan in order to pull his business out of a deep financial hole. When I asked him what the problem with the business was, he said that he thought it had something to do with his marketing and low conversion rate.

I counseled him to put his focus into his company’s marketing endeavors to improve sales conversions instead of taking out a large loan that would only increase financial stress on the company in the long run due to monthly payments and interest rates.

By talking with business owners about the roots of their problems and how they can possibly solve these—without taking a loan—Ms. Contreras-Sweet and others from the lending industry are doing a great service. The need for quality mentoring is just as vital as the need for faster bank-loan processing, or the need for more transparency in the alternative-lending space.

About the Author:   Ami Kassar founded MultiFunding LLC, based near Philadelphia, which helps small businesses around the country find sources of financing. (MultiFunding at times accepts fees from lenders that agree to make loans.)