Smart Borrower Blog

Plans to Acquire a Small Business Loan May Still Need to Wait


Oct 26th, 2009 @ 4:22 PM by Debbie Dragon


If you were hoping that the news of the improving recession means it is getting easier to acquire a small business loan, you likely will have to wait a bit longer. News from Reuters today says that according to PayNet Inc, the number of small business loans that have gone into default, or are behind 180 days or more, increased between August and September. According to Reuters reporter James B. Kelleher, in September, .85 percent of business loans had fallen into default, up from .81 percent in August.

There is good news, however, in that the number of small businesses that have fallen behind in payments has decreased. Those that are moderately delinquent, or behind by 30 days or more, fell from 4.35 percent in August to 4.22 percent in September. Accordingly, accounts severely delinquent, or 90 days or more behind, also fell to 1.40 percent in September from 1.48 percent in August.

News of the increase in small business loan defaults came one day after a report from the U.S. Commerce Department stated that the economy grew in the third quarter. According to the Commerce Department, government stimulus through programs such as “Cash for Clunkers,” which stimulated new auto purchases, and the $8,000 tax credit for first-time home buyers are what drove the uptick in the economy. It is unknown if this upward swing will continue as both programs have already or will expire within the next couple of months.

While the news that the number of businesses falling moderately to severely behind is improving, the fact that the number of loans going into default continues to increase does not increase confidence that the recession is nearing an end. According to a quote in the Reuters article from president and founder of PayNet Inc, Bill Phelan, he states, “It’s hard to imagine a robust recovery when you see numbers like this.”

President Obama is continuing to commit to the promise he made during his campaign to stimulate small businesses, believing they are the driving force behind growth and job-creation for the U.S. His administration is looking to raise the limits of small business loans from $2 million to $5 million.

Although the reports of a recovering economy are encouraging, hopes of acquiring a small business loan still need to be put on hold for a while. Banks are still tightening their belts and restricting the amount of loans they award. While we may be able to start breathing a sigh of relief, we still have a long ways to go.

About Debbie Dragon
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.

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