Compare and contrast the articles by Nelson (2022) and Loten (2022). How do they relate to topics

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Compare and contrast the articles by Nelson (2022) and Loten (2022). How do they relate to topics discussed in the BUS380 Entrepreneurial Finance course?

Why It's Hard to Get Startup Funding Now—and What to Do About It

Founders and small-business owners could face a difficult environment. It's time to plan.

Spooked by falling stocks and high inflation, investors, banks and consumers are tightening their purse strings.

Candace Nelson July 27, 2022

Candace Nelson, a pastry chef and former investment banker, is co-founder of the cupcake bakery chain Sprinkles. She also is co-founder of CN2 Ventures, which invests in and incubates new business ventures.

After a decade of easy money with low interest rates, and lots of market liquidity, startup founders and small-business owners in need of capital are facing a new reality: Their funding options are getting more limited.

Investors, banks and consumers are tightening their purse strings, spooked by the crash in the stock market and the highest rate of inflation in 40 years. For some, it can be hard to accept the wildly different environment in which we are now operating.

Why is it so much harder to get capital for your business right now?

Well, interest rates are on the rise, which means the cost to borrow money is getting higher. It also means investors have less of an appetite for risky startups because they can get a guaranteed return on investments that are more secure.

Second, stocks have fallen and a correction in public-market valuation ultimately trickles down into the private markets. As a result, venture-capital funds and other investors will be pickier about where they invest their dollars, which means companies will require stronger financials than they did last year to achieve the same valuation.

Third, consumer spending is on the decline. That could weigh on company earnings in the not-too-distant future, leading to a general retraction of the economy and the dreaded recession. Lenders hold on much more tightly to their money during recessions.

So what can founders and small-business owners do to prepare?