It has been years since the recession first hit, but many individuals still find getting a small business loan to be difficult. Immediately following the economic crash of 2008, large banks froze their lending programs, leaving small business owners in the dark, scrambling to find funding for daily operations.
However, it appears that more than just the gigantic, “too-big-to-fail” banks have been increasingly strict in their lending practices. An analysis of Federal Deposit Insurance Corporation data by American Banker revealed that banks of all sizes, including small and mid-sized financial institutions have steadily decreased their lending to small businesses enacting tough restrictions that many owners have found difficult to navigate past.
Decline in small loans
Although overall lending has dropped, the decline in small business lending has garnered particular attention. While individual, multi-million dollar loans have dropped off significantly over the past several years, the loss in loans under $100,000 has the potential to affect countless Main Street businesses, the engine of the American economy.
According to Washington Post reporter J.D. Harrison, when a bank decreases its small business loan program by just $1 million, 100 small companies could lose out on $10,000 loans. As opposed to large-loan programs, where applicants request millions, when the number of small dollar loans decrease, the potential job losses and boarded-up businesses increase.
The effects of tightened regulations on businesses have been significant. The U.S. Small Business Administration says small businesses create 65 percent of all new jobs across the U.S., and pay 44 percent of the country’s payroll, and without funding, growth in this sector has been slow.
Lending across all tiers of business has been hit, with lending to small- and mid-sized businesses by banks included in the FDIC data showing drops each year since the crash. Although under-$100,000 loan levels remain above the rate they were being distributed at a decade ago, and have shown sporadic gains over the past few years, even these findings are not all positive. These loans are still not being distributed at their previous high rate before the recession hit.
Making it even harder for business owners is the level of confusion regarding loan problems all the way to the top in Washington, D.C. The Washington Post recently reported that across the board, business owners, bankers, and government officials often have vastly different thoughts on the level of available capital.
For companies that are struggling to get a small business loan, National Funding can help. National Funding specializes in helping small businesses succeed, whether that’s through a small working capital loan or a cash advance for a business.
