Small Businesses Are Finding It Easier To Get Bank Loans
Businesses have had enough of the credit crunch, a global economic issue that, to say the least, tormented not only consumers but also entrepreneurs who need loans for start-ups and business growth. The onslaught of the recession was marked by restrictions on loan availability and generally limited loan resources, heightened difficulty in meeting requirements, tensed up background checks with a high credit score as prerequisite.
Banks had shut their doors to small businesses, leaving both newcomers unable to penetrate the industry and newly formed businesses unable to move forward. Even the consumers weren’t spared.
Fast forward to today, experts are seeing that as the economy is now on a rebound, the dark days of lending may be slightly over – at least for small businesses. From the pits of the 2010 recession that resulted in several small businesses for sale, downsizing, closures and lay-offs, increased hope is given to entrepreneurs for their start-up ventures or to expand their existing company or franchise opportunity. Financial institutions, which are showing signs of recovery from the pangs of the recent economic downturn, are now more welcoming to borrowers.
While the economy is gradually regaining an economic boost and making the way for eased access to small business loans, financial experts note the circumstances remain less favorable than how they might be in a stronger, fully recovered economy. In fact, tight conditions on collateral are still being implemented, and some banks are quick to cast doubt on unknown, unproven and insufficient entrepreneurial proposals and plans.
Nevertheless, entrepreneurs are now better positioned to think about starting or expanding. It’s easy to see how the present lending atmosphere is getting much better for small business owners with faster approval and lower interest rates. Statistics show that large banks are giving the green light to more small business loan requests, with over twice the rate of approvals given some three years back.
The New York Times features how small businesses are starting to see the light of day with banks now easing up on loans. Several bank executives share how their financing institutions are willing to give entrepreneurs the financial backing they need.
By many accounts, as the economy adds jobs, more small businesses are looking to borrow money, and more banks are eager to lend it — at least to the right borrowers. “It’s actually a really great time to access small-business capital,” said Keri Gohman, executive vice president and head of small-business banking for Capital One. “Rates are low and banks are also feeling the economic recovery. We really want to lend. Small-business owners can shop around and work with banks to find the best rates.”
But industry observers caution that both demand for, and access to, capital remain well below where they might be in a strong economy.
Perhaps surprisingly, banks seem more eager to lend than small businesses are to borrow.
“Demand is up 20 to 25 percent from the trough of the downturn, but that’s still very subdued compared to before the downturn,” said Paul Ballew, chief data and analytics officer for Dun & Bradstreet. “From the peak to the trough, there was about a 50 percent decline in that time. We’re a little beyond halfway back, but we still have a long way to go.”
One reason loan demand might be tempered is that many small businesses assume they will not qualify for a loan, said Jeff Stibel, chief executive of Dun & Bradstreet Credibility, an independent company that helps businesses manage their Dun & Bradstreet credit reports. According to Mr. Stibel, that is “because they are oftentimes going to the wrong bank.”
“The reality is that there are many lending institutions for any successful small business,” he said.
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