UTSanDiego.com

3 Things You Should Know About Small Business: Jan. 8

NEW YORK ( TheStreet) -- What's happening in small business today?

1. Small firm M&A jumps in December. Business brokers ended 2012 on a high note as small-business owners across the country rushed to complete the sale of their businesses before the end of the year. Completed transactions of businesses for sale "spiked significantly" in the final three weeks of 2012 as the fiscal cliff deadline approached and higher taxes loomed, according to a report by BizBuySell.com, the Internet's largest business-for-sale marketplace.

The number of closed small-business transactions spiked more than 40% in the final three weeks of the year compared to the sales pace during the same period in the prior year, BizBuySell.com says.

"The dramatic bump in closed transactions over the final three weeks of 2012 really shows the effect that tax policy can have on business owners' motivation. Given the eight-plus months it typically takes to sell a business, the end-of-year increase comes from owners who put their business on the market months ago pushing to ink deals before the New Year," says Curtis Kroeker, BizBuySell.com's general manager.

The trend of improving small-business financials continued in 2012, laying a foundation for a more robust business-for-sale market in 2013, BizBuySell.com says. As small businesses grew healthier over the year, the median sale price rose 3.2% to $160,000 from $155,000.

"We've seen small-business financials improve consistently for a few years now, yet buyers aren't yet flocking to the market," Kroeker said. "With more owners finally planning their exits, this results in a buyer's market keeping sales multiples low. Accordingly, brokers have indicated that it's more important than ever for sellers to provide seller financing to get deals done."

2. Alternative lending will hit its stride in 2013. For companies that are clearly creditworthy, the gates finally opened in 2012 for capital access. Banks are now eagerly hunting for good credit borrowers, but the problem is most small businesses don't meet banks' lending criteria. As a result, a large crop of alternative lenders, from factoring to merchant-cash lenders, have exploded since the recession, ready to supply money to the rest of the small businesses. Even with the high rates these lenders charge, the alternative lending industry will continue strong growth in 2013, according to MultiFunding's Ami Kassar in his New York Times blog.

"These lenders are extremely entrepreneurial and are leaving the banks behind with their speed and use of technology. Many are backed by premier investment banks and Silicon Valley venture capital powerhouses -- investors who understand that entrepreneurs and small-business owners are throwing up their hands in frustration over how long it can take to get a loan from a bank, especially if the loan is backed by the SBA," Kassar writes.