2015 Small Business Lending Options

Back in 2007, as the recession hit the nation hard, small businesses were a casualty of a difficult lending environment and a severe decline in consumer spending.  But slowly (and somewhat unevenly) small businesses lending is improving and statistics on lending support the recovery narrative. Demand for working capital loans is surging by some estimates as 2014 draws to a close and the new year is about to begin.

A recent report by the Federal Reserve and the Small Business Administration showed that while small businesses are recovering, they still have not returned to 2002 numbers – when the economy was at its strongest and lending to small businesses was high.  “According to the Federal Reserve’s Survey of Terms of Business Lending, in 2007 roughly 84 percent of the value of loans under $100,000 was secured by collateral, and by 2013 that figure had increased to 90 percent.”

The overall picture shows that economy is improving and trends such as unemployment are dipping – which bode wells for every sector – including smaller companies.  However, while there is some signs of recovery – the “Great Recession” took its toll and lending/borrowing for small businesses is still weak in some areas.

For instance, a positive sign shows that the value of micro-loans (under $100,000) which are generally procured by small businesses have risen since the recession years.  “In fourth quarter 2013, small business loan value increased by 0.4 percent and volume increased by 1.1 percent. Small business loans outstanding amounted to $585 billion in June 2013.”  However the SBA points out that lending was down less than half a percent from their June 2012 level, and by the end of 2013 both the number and value of small business loans increased …for the first time since 2008.

Lending to small businesses have been made mostly by the largest banking institutions and figures from CRA reports (which the largest institutions of a billion or more in assets file) can offer insight into local economies as well as the national picture. That said, according to the SBA, these reports show that lending increased to larger business by 8.9 percent compared to 12.0 percent in June 2012, and that small business loans have fluctuated increasing in 2012 and dipping slightly in 2013.

In addition, the SBA notes, “CRA-reporting lenders made six million small business loans with a total value of $206 billion. Of these six million small loans, 5.5 million were micro business loans valued at $68.5 billion (compared with 4.8 million micro loans valued at $66.4 billion in the previous year).”

Overall, the picture is more positive than negative as the economy struggles to return back to pre-2008 levels.  On the whole, more small businesses are starting to see their access to capital increase as borrowing conditions have been gradually improving.  While the numbers continue to fluctuate the outlook is still optimistic and even bad credit business loans are available for business owners.