Smart Borrower Blog

Small Business Loans Increase But Obstacles Remain


Jan 18th, 2012 @ 3:19 PM by Amber Nelson


Total lending to U.S. small businesses grew again in November, according to the latest Thomson Reuters/PayNet Small Business Lending Index, adding to a positive trend.

The Index, a measure of overall small business loan volume, posted an 18 percent increase in November 2011 from November 2010, reaching the highest level since February 2008.

This yearly upswing is an indication of:

“A new phase of the business cycle,” PayNet’s founder said in a Reuters article . “Businesses are betting on the future with increased investment spending.”

Small business owners are also getting better at keeping up with their loans. The Thomson Reuters/PayNet survey found that loan delinquencies shrunk in November, with loans in “moderate delinquency,” or those behind 30 days or more, falling 0.05 percent to 1.5 percent and “severe delinquencies,” or those behind by 90 days or more, slipping down to 0.39 percent.

Yet the latest data does not mean that it is now easy to get a small business loan. Credit remains somewhat tight, with a Pepperdine University study reporting that more than 60 percent of small business loan applications were rejected in 2011.

According to a survey by Chicago-based SurePayroll, one in five small businesses plan to borrow money in the next few months to finance their growth. But, the true number of small business owners seeking loans this year may shrink, as the National Federation of Independent Businesses (NFIB) said in a Wall Street Journal article that:

“Most small-business owners have either foregone seeking investment capital from banks due to weak prospects for growth, or simply given up trying after being rejected multiple times.”

Small business lending volume in 2012 will most likely depend on overall conditions in the market, like the state of unemployment and concerns about European debt woes. Credit will not significantly loosen until the economy stabilized and investors are more at ease with the economic environment.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

One Response to “Small Business Loans Increase But Obstacles Remain”

  1. 90 mortgages says:

    One thing I don’t understand: If mortgage companies are lending to a much reduced amount of people, shouldn’t the companies be pressured financially by showing no growth?

    Isn’t this a double edged sword?

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