residents looking to start a new business. Clients are getting loans of up to $50,000 in 30 days.
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Why Big Banks Are Suddenly Interested in Small-Business Lending Again | Inc.com
It seems like a long time ago now, but in June 2011, small-business lending at big banks dropped to its lowest levels. At that time, only about one in ten loan applications were awarded funding. We started my company’s Biz2Credit Small Business Lending Index to track traditional bank lending approval rates for small business loans on a monthly basis. What we discovered–and had the numbers to back it up–was that banks were frequently denying small business loan requests from their own customers. Prior to that, an entrepreneur was pretty much assured he could get some funding, particularly if he or she had a business account with the bank. Fortunately, small business lending has become a much higher priority for bank underwriters. To me, this is a sign of the continued slow but steady improvement of the U.S. economy overall, confidence among small business owners that they will be able to repay any funds that they borrow, and the availability and wide access to SBA lending. During the worst days of the Great Recession–when about 90 percent of loan requests were denied–small business owners shied away from applying for loans. Consumers were not spending, and businesses were not growing. The underlying assumption was. ‘Why waste the time when they are not going to give me a loan anyway?’. The high rate of refusal at traditional banks thereby opened the opportunity for so-called “alternative lenders” to fill the void. The problem was that they charged interest rates of 30 to 50 percent, which is a steep price to pay and resulted in some small business owners getting caught on a treadmill in which much of their revenue was turned over to the lenders. However, desperate times call for desperate measures, and if entrepreneurs were in a situation in which they needed quick money or a significant sum, they were able to get it from alternative lenders. Fortunately, as things have improved, banks have reentered the lending space. As borrowers’ tax returns began to show better results in the calendar years of 2011-13, big banks loan approvals climbed significantly from about 9 percent in June 2011. The silver lining was that companies learned to run “lean and mean” during the recession and then were able to squeeze out more profits when good times began to return. I speak with dozens of small business owners each week. The sense I get is that they are confident that now is as good a time to borrow money as ever before. Banks seem willing and interest rates are still low.
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