Smart Borrower Blog

Business Borrowing Demand Rises in 3rd Quarter, Supply Remains Subdued

Jan 3rd, 2018 @ 9:34 PM by Amber Nelson

The U.S. economy is making consistent progress, causing more business owners to seek loans to grow their companies but the supply of credit is not keeping pace.

According to the quarterly small business survey from Pepperdine University’s Graziadio School of Business and Management and Dun & Bradstreet Corp. released last week, demand for business financing grew during the third quarter. Their index that measures business appetite for funding rose 3.6% to a reading of 37.5 from 36.2 in the previous quarter.

At the same time, however, another index indicative of business access to financing rose just 0.2 % to a level of 33.1 in the third quarter from 33.0 in the second. That means that many companies that want to grow and potentially add jobs to the economy are being held back by lack of loan funding. Among small businesses in the survey, 44% said they wanted financing in order to grow or acquire another company and 47% of midsized businesses expressed the same desire.

There is a disparity in financing approval as well between small and midsized companies, the survey found. Among small businesses, 61% reported that debt financing was difficult to procure compared to just 31% of midsized businesses in the third quarter. That’s because only 36% of all small businesses were approved for bank loans while 69% of midsized firms obtained the loan money they sought.

While business owners may be feeling more confident about the direction of the economy, banks and other lenders are still avoiding risks as they continue to adjust to tighter federal regulation. Until the regulatory climate is comfortable for banks again, funding for small businesses – the riskiest of business loans – will likely remain restricted.

One bright spot in the survey was that many companies (46% of small businesses and 70% of midsized ones) did not feel the need for additional financing in the third quarter as their cash flow was more than sufficient for their goals.

The survey involved responses from 1,341 companies with revenue of up to $100 million in the Dun & Bradstreet business credit database.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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