The small business lending industry is not struggling simply because banks are refusing to lend money in this economy, small businesses are also unwilling to borrow in many instances. According to a recent study by Thompson Reuters and Paynet, business owners took out fewer loans in the month of January. The Small Business Lending Index which is based on Reuter’s study is exactly where it was this same time last year, it declined from 115 to 113. There are several reasons why the business loan industry continues to struggle.
Although there are many current economic issues that contribute to the lending conundrum, both sides of the lending spectrum have not shaken the scare of the financial crisis of 2008. There are no reasons for banks to add any risk to their portfolios as they continue to make solid gains with investments, fees, and many other aspects of the banking business model.
Borrowers equally have many reasons to refrain from borrowing. The last couple of months have resolved many of the current political tax issues but there is still a lot of political uncertainty on both the local and national levels. It is very difficult to determine what profits will look like after the impacts of health care and taxes. Also, business owners are unsure of the coming effects of recent budget cuts. Economists have predicted that many of the jobs from small businesses will be lost as a result of the cuts. This has created a very cautious approach to business improvements or expansion.
It makes sense that business owners want to focus on keeping what they have and improving their liquidity. Reducing debt is the logical response to periods of uncertainty and small businesses are much more likely to save rather than spend during periods of uncertainty because small budgets have a significantly less tolerance for risk.
For small business owners to change their stance and become more aggressive they need to see less risk and more reward by taking on more debt. The easiest way to do that is to make business loans easily accessible, offer the money at competitive rates and make them unsecured. Business owners are more likely to take chances when they have less to lose and more to gain.
One option for small business owners is to obtain business loans in the private sector. Most of these lenders can be found online and the business loan application process is very fast and flexible. Owners have access to immediate, unsecured business loans, and there are no restrictions on how the money is used.
Instead of remaining idle in this tough economy, owners can be aggressive and capitalize on existing opportunities as a result of the apprehension of most competitors. It is no secret that most businesses are willing to negotiate today, the economy is tough for all businesses. Small business owners can likely improve the position of their company at much lower costs as opposed to the economy being robust and pricing being much higher because sellers are less flexible when they have money.
Small business lending continues to struggle as caution is the predominant keyword to managing a business today. Political uncertainty and existing worries from recent financial stresses continues to hold down the business financing industry. There are opportunities to get access to business loans with private lenders, and there are many possible advantages to this type of move. It is this type of business decision that closes the doors of one company and leads to the significant growth of another.