Getting Business Credit Still Difficult for Small Businesses

 By Maria Valdez Haubrich

Small business owners’ access to capital is still being squeezed, it seems. Entrepreneurs’ ability to get credit when they need it is easing somewhat, but is still in decline compared to pre-recession levels of access to credit, according to the most recent Wells Fargo/Gallup Small Business Index survey.

In the survey, conducted in April, slightly fewer small business owners say credit is difficult to get now than in recent years. However, nearly three times as many say credit is difficult to get compared with the number who said this in 2007.

Business owners were asked, “Over the past 12 months, how easy or difficult has it been for your small business to get credit when you needed it?” In 2007, 54 percent said it was somewhat or very easy to get credit; in 2011, just 21 percent said the same. In 2007, just 11 percent said it was somewhat or very difficult to get credit; in 2011, that figure had risen to 30 percent.

On the positive side, the percentage of small businesses describing access to credit as somewhat or very difficult declined from 35 percent in the prior survey. On the down side, the percentage saying credit is somewhat or very easy to get has remained largely unchanged since mid-2009.

Gallup notes that the collapse of the U.S. housing market continues to be a major factor in small businesses’ problems accessing the credit they need. Before the recession, many small business owners used their homes and real estate to secure business loans and lines of credit. The collapse of home values, which still haven’t rebounded in most parts of the country, combined with tighter lending practices on the part of banks, has virtually wiped out many small business owners’ only source of collateral. In many cases, this is making it nearly impossible to get a business loan or line of credit. “Returning housing to price stability or better is a key to returning easier credit to the nation’s small businesses,” Gallup concludes.

How has the housing collapse affected your business’s credit-worthiness? Are you having trouble getting what you need?

Image by Flickr User Let Ideas Compete (Creative Commons)

This entry was posted on Thursday, July 14th, 2011 at 6:00 am and is filed under Capital Access, Raising Capital, Small Business, small business. You can follow any responses to this entry through the RSS 2.0 feed.


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