Small Business Lending Comeback Could be Under Way

Many small business owners may have, in the past, attempted to acquire financing that would have allowed them to address specific issues related to their companies, but been denied by lenders for any number of reasons. However, new evidence suggests that this type of lending environment may be going away, and would instead be replaced by a new one that allows for more flexibility from financial institutions.

Small business lending is on the rise nationwide, driven increasingly by larger financial institutions who had primarily stayed out of offering this type of credit, according to a report from the Associated Press. For instance, Bank of America itself increased the value of the total number of small business loans it granted in 2012 to $8.7 billion, and that was up 28 percent from the number seen just a year earlier. In all, the bank had some 3.2 million small business customers through the end of last year.

The reason for this major step forward in efforts to accommodate the needs of small business owners nationwide is that Bank of America sees the effects of the recession as having receded appreciably, the report said. The downturn seemed to hit smaller companies disproportionately hard, and as such many larger companies may have been more reluctant to grant them funding simply because they would not know what to expect from a company of that size going forward. But in the time since the recession was in its doldrums, small business owners have made appreciable efforts to sort out whatever might have been ailing them.

"We saw small business owners doing a great job of right-sizing their businesses when sales dropped off so dramatically in 2008 and 2009, and they've come back," Robb Hilson, head of small business banking at Bank of America, told the news agency. "Surveys have told us that despite all the challenges and the recession that they endured, very few of them have second thoughts about getting into business for themselves. They are very confident and optimistic about their own capabilities, less so about things that they don't have as much control over."

Another reason this could help
At the same time, many small business owners, who are now enjoying increased sales and other benefits of the still-recovering economy, could be feeling better about their prospects for improvement of their own, and that might be an impetus for them to actually go out and seek more financing as a means of expanding in the future as well, the report said. Optimism is certainly higher now than it was even a year ago, and as a consequence it's likely that banks of all sizes are now seeing more applications for small business loans, many of which may be from companies which are certainly qualified to receive the financing they seek now that lenders might be slackening credit restrictions somewhat.

Further, even those who do not qualify for small business loans from major lenders may be able to find financing from other sources, such as smaller institutions that do not have to adhere to stricter regulation by federal agencies, the report said. In addition, these larger institutions may be more willing now to help all applicants do what they can to find the most affordable loan offers available, particularly when they are rejected after their initial applications.

It might be wise for small businesses at times like these to assess other options for freeing up some money as well, such as by finding the most affordable small business insurance policies possible. By cutting costs for general liability insurance and other types of coverage, companies may be able to help their bottom lines considerably.