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Debt management still an area of concern for small companies

Tennessee banks that tapped a federal fund targeting small business loans have witnessed lending activity higher than the national average. However, according to the findings in a recent survey taken by a research firm, small business owners in Tennessee and across the country may still hold fears about incurring and managing debt in the struggling economy.

The survey, which tracked new commercial loans and leases granted to small businesses by U.S. lenders, measured only a small 3 percent increase in lending activity in July. After six months of declining lending activity, any increase might be perceived as a positive sign. However, additional data suggests that the country's small businesses might be slowing in their commercial activities.

For example, the economy rose only by 1.7 percent annual growth rate during the second quarter. In addition, the survey takers also found that found that businesses are taking longer to pay their bills: The number of loan payments past due by 30 days or more rose for the first time in two and one-half years, from 0.4 to 1.2 percent during July.

Small business owners may be borrowing less because they're unsure which direction the economy will take in a presidential election year. However, the nation's sluggish economy also discourages many from borrowing, hiring or expanding their small businesses.

Unlike corporate entities, many small businesses operate as sole proprietorships. Under that structure, a small business owner may be personally liable for the income and debt incurred by his or her company. If the small business doesn't have enough cash or assets to pay its debts, creditors might be entitled to take legal action against the small business owner's personal assets. For that reason, small business owners struggling with debt management can benefit from discussing strategies with a bankruptcy attorney, who will be knowledgeable about state exemption laws and other legal protections.

Source: Nashville Business Journal, "Federal fund boosts small business loans, Aug. 24, 2012

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