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Banks Again Opening Doors to Small Business Borrowers

Banks Again Opening Doors to Small Business Borrowers

By | 06.20.14
Banks Again Opening Doors to Small Business Borrowers

After years of giving small business the cold shoulder, banks are again courting entrepreneurs.

Business researchers released results of a study this week that showed banks are increasingly easing small business loan criteria, and giving small business owners favorable interest rates and terms.

The Associated Press reported June 18 that research on small business financing conducted by Dun & Bradstreet Credibility Corp., and Pepperdine University’s Graziadio School of Business and Management revealed substantial increases in small business lending by banks. Last month, 44 percent of small businesses surveyed reported receiving a bank loan, a sharp increase from the 39 percent receiving bank loans in February and 34 percent getting loans in the last three months of 2013.

The survey received 1,251 responses from small businesses of varying size.

Jeff Stibel, CEO of Dun & Bradstreet Credibility Corp., told the AP the findings reveal a banking industry again marketing to small business borrowers. Interest rates — which stagnated at 15 percent in recent years — are falling, and banks are offering longer terms on loans.

“We’re entering a new normal,” Stibel said.

The newfound optimism in the banking community can be traced to a small business sector that is stronger than it has been since before the recession. Small business owners are keeping expenses contained, and cash flow is stronger, Stibel said.

Despite the banks’ efforts to woo small business borrowers, survey results also indicated that entrepreneurs remain cautious about taking on loan debt. One index of demand for any type of outside financing stood at 32.1 percent, a drop of 1.3 percent.

Business owners reluctant to borrow have also been slow to hire. The percentage of small businesses planning to add two employees in the next year rose to 35 percent from 33 percent in February, but the percentage of those planning to add from three to 10 new hires dipped slightly. Some 47 percent reported having no plans to add workers in the next six months, an increase of two percent since the February survey.

Still, Stibel predicted small business hiring will increase, noting that more owners have obtained lines of credit without tapping into the funds, keeping the cash available for when they do expand.

Small Business Lending Reaching ‘New Normal’“; ABC News. June 18, 2014

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