Finance & Lending

 

09 04 2013

09 04 2013

Lasting Effects: How The Great Recession Has Affected Small Businesses

When the housing bubble burst in 2007, and financial institutions began collapsing at an alarming rate, it was unclear how the sudden meltdown would affect small and large businesses alike. Five years after the onset of what would soon be called the Great Recession, it has become clear that, while the economy is slowly rebounding, many small business owners are still suffering and find getting a small business loan difficult due to tightened lending standards enforced by traditional financial institutions.

According to a DePaul University analysis of the effects of the financial crisis on business, it appears that small businesses may have been hit the hardest during the crisis. What’s more, while the housing market is slowly making gains, mortgage rates are dropping, and big banks are yet again thriving, small businesses continue to struggle.

The report, titled “How did the financial crisis affect small business lending in the United States?” confirmed that the financial plummet in late 2007 and 2008 made obtaining a loan as a small business owner extremely difficult. Entrepreneurs even found that getting a business merchant cash advance became tough when small businesses needed access to working capital more than ever.

Hard-hitting consequences

Before the U.S. and global economies crashed, banks continually increased lending to small firms from year to year. According to the DePaul study, in June 1994, banks lent $308 billion to small businesses. By the peak of the lending boom in June 2008, banks provided small businesses with $659 billion in financing.

After the “too big to fail” banks were bailed out by the federal government, and despite the necessity for small business loans for companies to stay afloat and boost the fragile economy, lending standards remained rigid. Between June 2008 and June 2011, small business lending dropped by 18 percent to only $543 billion.

Meanwhile, overall lending dropped from $2.14 trillion in June 2008 by 9 percent to $1.96 trillion in June 2011. From this data alone, it is clear that the Great Recession hit small businesses much more significantly than larger organizations. It also resulted in the failure and closure of smaller lending institution such as credit unions. In 2009 alone, the Federal Deposit Insurance Corporation closed more than 100 banks. By 2011, 397 banks across the nation had failed, and 813 banks were on the official FDIC list of troubled institutions, further narrowing the field of available lenders for small businesses.

Continued lack of capital

Several years later, banks have continued to impose tight lending standards, especially on small businesses. While overall small business lending fell by 18 percent from 2008 to 2011, small commercial and industrial suffered even more, falling 20 percent during that same time period.

As a result, small businesses experienced a lack in cash flow, which forced many to permanently close their doors. With fewer customers and a lack of financial capital, small firms continue to struggle across the country. If a small business owner is still having trouble finding access to finances, they can come to an alternative lender like National Funding for help. National Funding can provide guidance on everything from equipment financing to getting a small business loan.

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Terms & Conditions

General Acceptance

Any applications submitted electronically shall have the same force and effect as if the application bore an inked original signature(s). The above information, together with any accompanying financial statements, schedules, or other materials, is submitted for the purpose of obtaining credit and is warranted to be true, correct, and complete.

 

US Patriot Act:

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person and business that seeks a business loan.  What this means for you: When you apply for a loan, we will ask for your business name, address, and Tax Identification Number.  We will also ask for your name, address, date of birth, and other information that will allow us to identify you.  We may also ask to see your driver’s license or other identifying documents.

 

For Loan/Merchant Services:

The Merchant and Owner(s)/Officer(s) identified in the application (individually, an “Applicant”) each represents, acknowledges and agrees that (1) all information and documents provided to National Funding, Inc. (“NF”) including credit card processor statements are true, accurate and complete, (2) Applicant will immediately notify NF of any change in such information or financial condition, (3) Applicant authorizes NF to disclose all information and documents that NF may obtain including credit reports to other persons or entities (collectively, “Assignees”) that may be involved with or acquire commercial loans having daily repayment features and/or Merchant Cash Advance transactions, including without limitation the application therefor (collectively, “Transactions”) and each Assignee is authorized to use such information and documents, and share such information and documents with other Assignees, in connection with potential Transactions, (4) each Assignee will rely upon the accuracy and completeness of such information and documents, (5) NF, Assignees, and each of their representatives, successors, assigns and designees (collectively, “Recipients”) are authorized to request and receive any investigative reports, credit reports, statements from creditors or financial institutions, verification of information, or any other information that a Recipient deems necessary, (6) Applicant waives and releases any claims against Recipients and any information-providers arising from any act or omission relating to the requesting, receiving or release of information, and (7) each Owner/Officer represents that he or she is authorized to sign this form on behalf of Merchant.(8) I consent to receive direct mail, faxes, and e-mails sent by National Funding and its affiliates for the purposes of transmitting account updates, requests for information and notices, and (9) this request is for business and not for consumer purposes.

 

For Equipment Services:

I hereby certify: (1) the information provided is true and correct, (2) you are hereby authorized to investigate all bank, credit, and trade references, and said references are hereby authorized to release any requested information to you or your nominee, (3) such authorization shall extend to obtaining personal credit profile in considering this application and subsequently for the purposes of update, renewal or extension of such credit or additional credit and for reviewing or collecting the resulting account, (4) this information may be transmitted by us to you and by you to underwriter(s) for the purpose of granting me credit, either electronically or manually, and that by submitting this application, I take full responsibility for transmission thereof, (5) I am over 18 years of age, (6) I acknowledge my rights under the Fair Credit Reporting Act, (7) I consent to receive direct mail, faxes, and e-mails sent by National Funding and its affiliates for the purposes of transmitting account updates, requests for information and notices, and (8) this request is for business and not for consumer purposes.

The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status or age (provided the applicant has the capacity to enter into the binding contract); because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. If for any reason your application for business credit is denied, you have the right to a written statement of the specific reasons for the denial. To obtain the statement, please write to National Funding Inc., 9820 Towne Centre Drive, San Diego, California 92121.  Funding amount and credit approval is subject to a full credit profile review.