Are Banks Finally Meeting Small Business Lending Demands Again?

Over the past several years, even since the end of the recession, many small business owners across the country have expressed ongoing frustration at the fact that they often can’t qualify for loans from banks, both national and local. However, some experts say that trend is finally reversing itself, potentially giving companies a little more access to capital they may desperately need to grow.

For their part, local banks actually argue that they’ve only kept credit access so tight for the last several years because they simply haven’t come across enough qualified applicants, according to a report from Crain’s Chicago Business. That might be due to the fact that many are only just recently starting to relax their credit standards, but the fact is that they’re now seeing more demand from what they consider to be qualified companies.

“Our loan demand has become strong over the past six months,” Jack Mensching, president and chairman of Itasca Bank and Trust Co., told the newspaper. “We’re more optimistic than we’ve been in a long while.”

Why is this happening now?
The economic recovery over the last few years has been slow to reach businesses on Main Street for the most part, but it now seems as though the effects are finally trickling down, and releasing some of the pressure as well, the report said. More companies are seeing their revenues increase, and as a result they’re hiring more workers, too. Further, companies that went through the financial downturn and came out the other side, even if they were a little battered, are the ones that seem most poised to succeed going forward.

What’s interesting, too, is that even when banks make loans through the U.S. Small Business Administration, companies applying for such financing often don’t need them, and end up taking on traditionally underwritten loans instead, the report said. One lender interviewed by the newspaper said that only about 5 percent of its lending efforts have recently even had to be backed by the SBA, just because of how strong companies have been.

Businesses that want to best position themselves to succeed when trying to obtain new financing might want to consider the ways in which cutting costs can help. For instance, if they can reduce their expenditures on small business insurance coverage including liability insurance, they may be able to save significant amount of money every year, which can then be devoted to shoring up other aspects of their companies.