Business Trends


11 26 2013

11 26 2013

Stiffer Bank Lending A Post-Recession Trend

Small business owners are all too aware of the difficulties the recession brought with regards to financing. Bank lending was cut sharply, which made investing back into small businesses to spur growth difficult. In the years since, although many small businesses have managed to recover, lending rates have slumped behind, according to economists Anne Marie Wiersch and Scott Shane. As a result, demand for bank loans is shrinking as business owners find new ways to forge the nation’s economic recovery.

How much did lending decrease during the Great Recession? Although 100,000 small businesses were added between 2007 and 2012, the number of loans dropped by 344,000, according to Wiersch and Shane. Furthermore, during ​quarter four 2012, the value of commercial and industrial loans of less than $1 million was 78.4 percent of what it was in 2007 when adjusted for inflation.

Two arguments can explain the decrease – some attribute it to tighter lending practices from banks, while others say demand for getting a small business loan has decreased. In reality, both are likely causes, which, when acting in concert, explain the lending climate seen today.

Favoring big business

During the recession, banks began to view small businesses as more risky borrowers, according to Wiersch and Shane. Instead, many shifted their focus to big businesses. Smaller loan applications were not considered worthwhile, leading many to be rejected.

After 2008, the majority of banks increased lending standards for both small and large businesses, according to the Office of the Comptroller Survey of Credit Underwriting Practices. However, during 2011, large business lending experienced a net loosening when more standards were being lowered than raised. Small business loan standards, on the other hand, remained tight. What the results suggest is that while bank lending may have bounced back, focus had shifted away from small businesses.

The same could be said for federal programs aimed to help small businesses. In 2012, the average loan backed by the U.S. Small Business Administration was $337,730, which is more than what most small businesses generally ask for, according to The Huffington Post.

Alternative financing comes out ahead

The sharp drop in bank lending appears at odds with the growth of small businesses since the recession. The surge of alternative lenders, however, is a key factor in helping small businesses recover, according to Forbes. As banks and credit unions began to focus on ‘A-credit’ clients and larger businesses, a void was left in the market for small businesses. Subsequently, alternative lenders filled the gap, discovering innovative ways to provide financing.

For example, the practice of underwriting in-person by committees causes banks to take 30 to 60 days for approvals and funding, according to Forbes. Developing technology for underwriting, on the other hand, has allowed alternative lenders to provide loans in 24 to 48 hours.

The advantages of alternative lenders can help explain why demand for financing from banks has decreased. Small business owners are more involved than ever with their work, meaning the hefty paperwork and long wait times for traditional lenders are no longer possible. National Funding, on the other hand, streamlines the process, allowing small business to reinvest in no time.


Find Out How Much Funding You Qualify For

Fields marked with an * are required
By clicking this button I agree to all terms and conditions.

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, text-messages, 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, text-messages, 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.


Text Messaging:

By providing my wireless phone number to National Funding, Inc., I agree and acknowledge that National Funding, Inc. may send text and multimedia messages to my wireless phone number for any purpose. I agree that these text or multimedia messages may be regarding the products and/or services that I have previously purchased and products and/or services that National Funding, Inc. may market to me. I acknowledge that this consent may be removed at my request but that until such consent is revoked, I may receive text or multimedia messages from National Funding, Inc to my wireless phone number.

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.