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Small Businesses Still Struggle to Obtain Access to Credit

February 7th, 2012 ::

By Karen Axelton

Nearly four years after the nation’s financial meltdown, small business owners seeking financing find themselves between a rock and a hard place. Some 90 percent of small business owners say availability of credit is still a problem for small business, reports a new poll by the American Sustainable Business Council, Main Street Alliance and Small Business Majority. The survey of more than 500 small business owners found that 60 percent of small employers have personally faced difficulties trying to obtain loans to grow their businesses.

Getting capital wasn’t always such an issue for entrepreneurs. A 61 percent majority of respondents say it’s harder for them get loans now than it was four years ago, with 29 percent saying it’s much harder. Only 9 percent of respondents say it’s gotten easier to get a loan.

What do small business owners think would help ease the credit crunch? Some 90 percent of business owners support regulatory changes that would make it simpler for community banks and credit unions to lend to small businesses. Another 77 percent support providing incentives for community banks to lend more to entrepreneurs. Specifically, by more than a 2:1 ratio, small business owners support encouraging credit unions to lend more to entrepreneurs by increasing their member lending cap from 12.25 percent of their assets to 27.5 percent of their assets.

A large majority—82 percent of respondents—also supports tighter credit card regulations, such as clearer disclosure of terms and caps on interest rates. In addition, nearly half, or 47 percent, strongly support these kinds of regulations. The survey also found that 52 percent of small business owners have used credit cards to finance their own business.

Another way small business owners think loans could be made more accessible is by reducing collateral requirements. One-fourth of those surveyed have used their homes as a source of capital for their business through a home equity line of credit. With home equity values dropping in many parts of the country, this type of collateral is no longer available to many entrepreneurs.

Finally, the majority of small business owners, or 57 percent, think that reducing the principal on underwater mortgages to the homes’ current market value would boost consumer spending, which would help small businesses regain market share. Nearly three-fourths (73 percent) said the fallout from the mortgage crisis has hurt their businesses by reducing consumer spending and demand.

The poll also asked respondents about some specific proposals put forth in President Obama’s American Jobs Act. The vast majority (69 percent) supports committing $50 billion to new and existing infrastructure projects—such as making improvements to road, bridge and water systems—that would generate new jobs and help increase consumer spending. Another 59 percent favor creating a nationwide wireless network and improving the accessibility of high-speed wireless services, which would benefit both businesses and consumers.

Read the full report here.

Image by Flickr user Rojer (Creative Commons)


 

The views expressed here are the author's alone and not those of Network Solutions or its partners.

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Posted in Capital Access, Raising Capital, Small Business, small business | 5 Comments »

This entry was posted on Tuesday, February 7th, 2012 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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  • http://www.blurbpoint.com/ Internet Marketing Company

    It is true that many of the small businesses find the loan as the best option to start their business, but it is also the thing that not all the businesses can found success with their business and at that time it be little hard for them to re-pay that loan and this can make their credit worst in the market. So at the time of the loan option, one need to be more careful and choose such loan source which can be helpful for your business though facing failure in the beginning.

  • http://www.topoftheburg.com/ Website Design Services

    A very true situation has arose over the past few years. Loans and lines of credit are near impossible to get if you are a small business owner looking to start-up or expand. Start-ups will find it a cumbersome task to get any amount of money. My findings conclude to start with your small local branch banks, you have a much better chance at getting a loan with a hometown bank than you do with someone like PNC or Wells Fargo. Make sure that when you are trying to get a loan for your business that you have a very extensive business plan with a 3-5 year outlook in place. 

  • http://britainloans.co.uk/ payday loans

    Of course banks are reluctant to loan to small businesses, most small business fail withing the first few years. What’s wrong with requiring 3 years of financials before forking over a half million dollars? Any company that depends on loans to make payroll isn’t self sustaining. Maybe a loan will offer the capital to become more profitable, maybe it won’t. But if you aren’t profitable enough already to pay employees, how the heck do you expect a federally insured bank to loan you money? Since you have cash in your account this does not apply to your business. But for a small business that is experiencing growing pains, a short term collateral loan is a viable option.

  • http://britainloans.co.uk/ payday loans

    Of course banks are reluctant to loan to small businesses, most small business fail withing the first few years. What’s wrong with requiring 3 years of financials before forking over a half million dollars? Any company that depends on loans to make payroll isn’t self sustaining. Maybe a loan will offer the capital to become more profitable, maybe it won’t. But if you aren’t profitable enough already to pay employees, how the heck do you expect a federally insured bank to loan you money? Since you have cash in your account this does not apply to your business. But for a small business that is experiencing growing pains, a short term collateral loan is a viable option.

  • http://www.invoicefactoringuk.com/ Invoice Factoring

    Small businesses that has bad credit is like a birds that don’t have wings, so you have bad credits it is impossible for you to secure your business and finance another one.