Small business owners have recently begun to note that they have an increased interest in obtaining financing as the economy continues to improve and they feel better about their prospects for expanding, but the lending market for this type of loan remains fairly constricted.
Data from the Federal Deposit Insurance Corp. shows that no matter what size lender they turn to or loan amount being sought, small businesses are now having a more difficult time obtaining credit than they did even last year, according to a report from the Washington Post. This has actually been true, to some extent, since the beginning of the recession, and even as some signs of loosening are now being observed, the lending environment remains incredibly constricted no matter what size loan is being sought.
"Nobody has been immune," Rohit Arora, chief executive of the small business credit marketplace Biz2Credit, told the newspaper. "It's starting to get better, but there is still a lot of pain out there."
Interestingly, loans for the smallest amounts – in the neighborhood of $100,000 or less – have been the most accessible throughout the last few years, even as perception was that these were particularly difficult to obtain, the report said. In addition, when the smallest loans decrease in availability, that likely impacts a larger number of borrowers; if 10 companies are not granted loans for $100,000 each, that's the same amount being denied, overall, as one company seeking $1 million in loans, which itself likely leads to beliefs that it's more difficult for small businesses to obtain any kind of credit at all.
Further, it should be noted that while the belief is generally that credit unions and other community lenders are generally those that are most free with smaller loans, the opposite is true, the report said. Large banks – those with more than $10 billion in assets – were actually far more likely to extend financing, in terms of dollar volume, than those with less than $10 billion or $2 billion in assets, more or less since before the recession began.
Small business owners who may not be able to obtain financing might be able to free up cash in another way: by examining what they pay for their small business insurance. It may be possible to reduce costs for policies including those for workers' compensation and liability insurance as a means of giving companies a little more flexibility moving forward.