As the US economy is replenished with new jobs, small companies are again beginning to look for where to lend money for business development. An increasing number of banks are ready to give them small business loan after appropriate checks. Many lenders do not hide the fact that today this is the best option to get access to borrowed capital. The cost of such money is as low as ever, and the banks are perfectly aware of the economic recovery. Therefore, small business owners and those who are just thinking about it have a choice in loan offers.
Development of small business loans
Industry analysts warn that despite all the optimism and demand for borrowed capital and its availability, it still does not reach the indicators that could be in a truly strong economy. So, for example, 3 years ago, American banks approved only 9% of applications submitted for business loans. Today this rate is already 20%. But before the crisis, 36% of applicants received what they asked for.
The statements that banks today are more interested in lending than small businesses themselves look a bit paradoxical. The number of applications for small business loans is gradually growing, the growth has already reached 25% of the “bottom”, but it is too early to compare with the pre-crisis indicators.
Banks are not guilty
Part of the reason that small businesses are so few looking for bank financing is the uncertainty of job seekers that applications will be approved. Naturally, assuming a refusal in advance, businessmen simply do not consider it necessary to contact banks, but are simply looking for other opportunities. Again, more and more refusals today sound not because of the situation in the economy, but because entrepreneurs do not prepare well for the process of issuing a loan – either they choose the wrong bank, or they don’t decide on the loan product, and sometimes they even find it difficult to answer exactly how much money they need. With those who just intend to start their own business in the United States, another problem – they do not know where to address.
With and without security
Another important point that cannot be ignored when talking about small business lending in the United States is that more and more enterprises are rebuilding their business after several years of hardship. The disaster cycle for small firms seems to be coming to an end and their balance is “improving”, cash flows are in excellent shape, as is their ability to pay bills, including small business loans from Texas Payday Loans.
Good news from the housing market also contributed to this. Before the crisis, many businessmen successfully used their real estate as collateral, if necessary, to obtain additional financing in order to improve business. The scheme, which worked for decades, failed during the mortgage crisis – but now the process is recovering, the value of real estate has “crawled” up, and banks are again ready to consider options with business lending on collateral.
Small business loans’ affordability
Banks claim to use the same underwriting principles – but some of them are misleading. If we compare the current terms for obtaining loans with those that were in effect a couple of years ago, then the increase in loyalty on the part of lenders can be observed. However, this is also associated with an improvement in the state of affairs of the entrepreneurs themselves.
By the way, some lenders have lowered their standards in relation to the credit ratings of applicants – in the United States you will be assessed not by the abstract “quality” of credit histories, but by a very specific number of credit points, which are kept by the credit bureaus. Lenders explain their position simply – the economy is recovering, the risks of non-return of funds are decreasing, which means that you can show your willingness to contribute to the process by lending a larger number of small businesses. Which, as you know, are the engine of the economy.