Small Business Loans Remain Scarce
Small business owners have continued to have trouble nailing down loans nearly a year after the $30 billion, federally guaranteed 2010 Small Business Act was passed. Philadelphia small business loan advisor, MultiFunding, recently released a report noting that the nation’s largest banks have shown almost no interest in making loans to small businesses. This is particularly discouraging as these loans are desperately needed for expansion (jobs creation) and to manage cash flow.
From a 15 August article by Jondi Gumz in Silicon Valley MercuryNews.com, “MultiFunding: Big banks fall short in small business loans”, see:
http://www.mercurynews.com/california/ci_18687282?nclick_check=1
“MultiFunding reported Bank of America and Citibank control about a fifth of all bank deposits in the U.S. but made only 0.6 percent of all U.S. Small Business Administration 7(a) loans in 2010. Bank of America is second in deposit market share in Santa Cruz County….Chase ranked 10th, with 10.8 percent of deposits nationwide and 4 percent of SBA loans nationwide.”
“MultiFunding's July survey of 1,200 small business owners nationwide found 18 percent applied for a loan in the past year, with 58 percent getting what they requested. Of those that did not apply, 73 percent say they still need a loan to improve business, but more than half held off, waiting for revenues to improve, fearful of rejection and discouraged by high interest rates.”
Very disturbing. Even with $30 billion in federal loan guarantees, the big banks have shown almost no interest in making loans to small businesses. Wall Street continues to thrive while Main Street languishes. In our current weak recovery, many businesses have weak cash flow and need those loans to stay in business.
What’s the reasonable way forward?
I’ve run through the gauntlet of the small business loan process and I can tell you that it’s not fun. If you can see that there might be a need for a loan on your horizon, start the process as early as you can (don’t wait until you actually need it). In the eternal Catch-22 of the small business universe, the more you need that money the less likely the banks will be to lend it to you.
You might also be well served by shifting your business accounts from large banks to smaller local/ regional banks. As noted by MultiFunding, the smaller lenders are much more willing to work with you.
Finally, when looking for funds for business growth, investigate federal, state, and local incentive programs. Check out other provisions of the 2010 Small Business Act (there are significant other opportunities for small businesses). Don’t count on the traditional business loan. Look for creative funding sources.
John Whitney AIA is Senior Vice President for Business Development at Conductrus, a software as a service (SaaS) provider of workforce scheduling software tools for businesses with mobile field service management needs. He is also Founder and Principal at the Clean Energy Action Project, a cleantech research and renewable energy consulting enterprise.