We spoke to Scott Lynch, Director of Client Services at Direct Capital, to get a sense of what small businesses will be doing in 2012. The post that follows draws from that conversation.
When Scott Lynch talks about small business, optimism abounds.
“Stability in business has really come back,” he says. “People can see the path to growth.”
Those words would have been remarkable a year ago, before twelve months of slow economic recovery and a shot in the arm of consumer and business confidence alike. Here, in the first week of 2012, it seems like a natural extension of a national mood that’s south of buoyant but a lot further north of despairing than it has been in years.
Why such optimism, though? Lynch sat down with Matt Sullivan and I to discuss exactly that.
Stability And Confidence
The sea change in confidence has been a big reason why the economy is clawing its way back, and a big reason why Lynch is seeing more confident small businesses now. That confidence mirrors that of consumers,
That confidence has given small businesses the courage to take on more financing and carry more debt as they target new revenue. Lynch said the average financing deal size at Direct Capital has been increasing and is expected to keep doing so in 2012, a harbinger of continued growth for small businesses.
“They’re more comfortable taking on more debt, taking on that gamble,” Lynch said.
Election years generally bring some semblance of economic stability, he added, and that should help to continue the slow but steady growth that has been in evidence from the latter half of 2011 until today.
“Businesses just continue to stabilize and grow,” he said. “There’s more confidence than in the first half of 2008, even.”
The Path Forward For Small Business
So where does all that financing and confidence go? Lynch said one area is a renewed focus on sticking to company core values and improving the customer experience.
It’s a natural fit, he said, given that small businesses work intimately with their customers and are often pillars of their communities. A focus on improving those intangibles indicates that companies are worrying less about staying afloat and more about keeping good times rolling.
“That’s a leading indicator for the marketplace,” Lynch said, adding, “and the entire economy.”
All that good karma will also go toward two industries that are experiencing massive growth and should continue to do so are health care and machine tools manufacturing, according to Lynch. Health care and health care lending are taking off thanks to demand for X-ray machines and electronic medical records, while machine tools are needed to drive a rapidly increasing demand in manufacturing and production across the country.
Because of that success, vendors are stepping back from traditional partners and trying to see if those deals are the best fit for them, which has led to more of them choosing financing partners like Direct Capital. There’s been a similar uptick in lending demand for startups, which Lynch called a return of the “entrepreneurial spirit.”
If this all sounds too optimistic for your liking, that’s okay. It’s been a rough few years for everyone. I truly believe we’re turning the corner, though.
Your comments on this report are welcome. We hope to hear from you.