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What Is The Current Lending Environment For Small Businesses

According to a recent survey conducted by Sageworks, only 3 out of 4 business owners who have been in business for less than ten years haven’t applied for a loan for their business. While many of the business owners chose to seek alternative funding to get their venture off the ground, a quarter of those included in the survey felt that they would never get approved. The current lending environment for small businesses has been worrisome for many owners, but changes may soon be on the horizon.


The state of the small business lending environment

Small business lending has been hardest hit by the recession and is slowly recovering. Recent numbers indicate that banks provided $585 billion in lending to small business. This increase represents a 1 percent increase from September of last year. When compared to the $711 billion available in 2008, some forecasters argue that small business lending is still lagging where recovery is concerned. Although a modest increase, many are encouraged that the trends will likely continue.


How larger businesses are fairing

Recent numbers released show a 9 percent uptick since 2008. The Federal Reserve reports that loans to businesses overall increased, totaling $2.48 trillion as of late March. This marks the highest increase that has occurred since the financial crisis. Among the cited reasons for this change is the more lax standards held by some loan officers where larger businesses were concerned.


Women and small business lending

Small business lending is a contentious issue among women business owners. Women business owners continue to struggle in this environment despite the ever-increasing number of women-owned businesses. When women apply for business loans, they are more likely to get rejected than their male counterparts. According to Biz2Credit.com research, anywhere between 15 and 20 percent of applications for loans submitted by women are rejected. Reasons for the lack of accessibility have been tied to the more stringent requirements that resulted from the 2008 credit crisis. Owners of young businesses and those without collateral to offer were increasingly likely to get rejected. Cash flow and revenue are additional barriers women face in applying for a loan. Another factor behind the low lending levels are that women’s credit scores were typically 20 points or more less than males, according to Biz2Credit.


Analysts see the increase in overall lending to all businesses as a sign that the recovery is gaining momentum. Smaller businesses are still struggling in the post-2008 financial crisis when it comes to securing lending. Some forecasters believe that as banks are beginning to loosen standards for larger and medium-sized business, small businesses will eventually benefit from that trend.

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