The Rhyme and Reason Behind the Lack of Small Business Lending
Current small business owners as well as aspiring business owners have more than likely noticed how difficult it has become to successfully secure a small business loan. While many might be under the impression that the Great Recession is to blame, the truth of the matter is that there are several factors at play. What this essentially boils down to is that anyone who is in need of a small business loan should approach the matter at several different angles not only to see why there is a lack of funding, but also what they can do to improve their chances of getting a loan.
Lack of Expansion
One of the biggest issues surrounding the dip in small business loans is that small businesses simply aren’t expanding. Because of the Great Recession, businesses find themselves with a lack of funds that they need to successfully expand, which means that they aren’t reaching out to banks for loans that they have no way of paying back. Not only that, but there was also the fact that some small business owners are under the impression that credit isn’t quite as available as they would like for it to be, which meant that they don’t even go through the trouble of applying for a loan.
Lack of Creditworthiness
From a lender’s point of view, small businesses simply aren’t as creditworthy as they once were. What this means is that small business owners lack the credit scores, liquid cash, and collateral that lenders look for when they decide whether or not to extend a loan to a business owner. In order to keep their business afloat during the recession, businesses might have had to use more of their credit than they might have liked, which undoubtedly caused their credit scores to suffer as a result.
Something else to think about with this particular factor is that the value of residential and commercial properties was quite low during the Great Recession, which means that it was harder for small businesses to meet the collateral requirements set by banks. Even though the prices of property have improved in recent years, they’re still lower than they were in 2007.
Shifting Lending Standards
Yet another way that small business lending has changed is that lending standards have made a shift. Lenders have tightened their credit standards, which has squeezed even more businesses out of the running for lending. Something else to think about is that banks have actually made it easier for bigger companies to secure financing while they were making it more difficult for small business owners. One of the reasons that banks might have had a change of heart when it came to the lending standards for small businesses is that the degree of supervisory and regulatory standards became tighter.
The Silver Small Business Lining
Even though the lending playing field has changed for small business owners, merchant cash advance companies like American Finance Solutionshave made it easier and more efficient for them to receive funding through the use of an innovative new platform. Now small business owners will not only be able to get the funds that they need, they’ll also receive help in determining whether or not they’ll actually be able to actually pay those funds back.
While the lending game might have changed for small businesses, there will always be a way to be on even footing with the larger companies with a little will and determination.