Plenty of data has recently confirmed what many small business owners across the country knew anecdotally: It’s not easy for companies of this size to get loan approval these days. However, new information suggests that the more they want to borrow, the greater the chances a lender will actually sign off on the application.
Over the course of last year, about 40 percent of all small businesses applied for credit, indicating little change in demand for this type of financing among such companies, according to the latest data from the Federal Reserve Bank of New York. Typically, this kind of money was most often sought to help firms cover their daily costs (39 percent), but the number of enterprises asking for such funding as a means of helping to support business growth or investments was on the rise as well, and climbed to 30 percent of those polled.
The problem, though, seems to be that when it comes to smaller dollar amounts, most banks aren’t biting, the report said. While 90 percent sought loans of less than $1 million, and more than half of that number was for financing of less than $100,000, it was apparently still difficult to get approval; just 58 percent of applicants were able to actually get it, and that number was little changed from the previous year.
Interestingly, it seems unprofitable businesses are getting more involved in the market, as 63 percent of companies which applied for some type of loan last year were not seeing their numbers in the black, the report said. That’s up from 56 percent in 2012. It should also be noted that 76 percent of applicants had previously obtained some kind of approval, an increase from 69 percent. Further, the companies that were doing better and had handled credit well in the past also had a tendency to ask for more money, and were more likely to get it. They also typically paid less in costs for the financing they received.
Owners who want to make sure their companies are as sleek and streamlined as possible ahead of any applications for additional financing may want to do so by trying to cut costs. One way in which they might be able to do this is to simply find more affordable small business insurance coverage – such as general liability insurance – as a means of potentially saving thousands of dollars annually.