By Rieva Lesonsky
I blogged recently on GrowSmartBusiness about new loan programs from the Small Business Administration (SBA). But when it comes to financing, the federal government isn’t the only one reaching out to entrepreneurs these days.
With the worst of the Great Recession behind them, banks are feeling more confident about lending to small business customers, and actively seeking small businesses to lend to. These efforts are needed, because according to a recent report by The Wall Street Journal, the state of small business lending is still pretty dire.
A January 2011 survey by the National Federation of Independent Business reported that 91 percent of small businesses either didn’t want to borrow money or were already meeting all their credit needs. The Federal Reserve reports 10 percent of large U.S. banks have eased lending requirements for small businesses in the past quarter—but nearly 20 percent had done so for midsized to large firms. And Equifax Inc. and Small Business Financial Exchange report that the number of small business loans and lines of credit granted in the third quarter of 2010 had declined more than 70 percent compared to before the recession started.
With entrepreneurs reluctant to borrow, banks are trying innovative tactics to “sell” small business owners on loans. Some examples from the Journal:
- Bank of America launched a software program that makes it easier for its North Carolina branches to offer small businesses credit cards and other financial products. The company has also pledged to add 1,000 small business bankers in the next 18 months.
- U.S. Bancorp is training employees at many of its locations in supermarkets to make small business loans.
- Banks are weighting quarterly financials more heavily in loan decisions, looking for evidence of growth.
- Banks are also considering orders and outstanding sales as factors in the lending decision.
The efforts are paying off at some banks. For example, Wells Fargo & Co. reported its small business loan-approval rates rose 18 percent in the fourth quarter of 2010 compared to the same period in 2009.
Do you need a loan? Many of us learned to get by without outside financing during the recession—and being self-reliant can be a good thing. But if a lack of capital is starting to cramp your business growth plans, now may be a good time to start visiting your local banks and see what they have to offer.
Image by Flickr user Bosc D’Anjou (Creative Commons)
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