Is the state of financial lending getting better or worse? The answer to that appears to be yes. Yes, according to a recent report by the Small Business Administration’s Advocacy Group, small business loans are on the increase having picked up 10 percent over the past year. But also, and you knew this was coming, the numbers from the same report seem to indicate that dollar amounts per each term loan itself, has decreased in total value (by about 3 percent). In other words, according to the Wall Street Journal banks seem to be offering up more small business loans though the actual dollar value of those loans appears to be slightly shrinking.
Many Still Struggle to Secure Start Up Business Loans
Though the numbers are improving, obtaining start up business loans remains challenging with banks requiring extensive paperwork and long wait periods. As such, small businesses in search of new capital are continuing to go to third-party lenders or alternative finance companies such as invoice factoring companies. With factoring accounts receivables, you can get your money in about 48 hours. Most banks will make you wait weeks before deciding whether to lend to you or not.
In addition to account receivables factoring, more companies are seeking other alternative finance options such as asset-based lending or inventory financing where their collateral can be used thus reducing risk. Some small business advocates argue that banks unwillingness to take on more risk in terms of small business start up loans are in fact part of the problem.
Factoring Services Remain an Option over Loans For Small Business
Banks, on the other hand, are arguing that they are just being cautious given the state of the economy. They contend they want to provide more loans but must take baby steps. Some industry experts argue that as companies with currently small business loans continue to pay them back and show their creditworthiness, this will help alleviate banks’ concerns with risk and small business lending will increase as a result. Though the pace may be slower than some small business advocates would like to see, most believe the report indicates a sign of thing going in the right direction overall.