Some Disturbing News about Bank Lending to Small Businesses

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As the economy fell into a recession, bank lending to small businesses dropped dramatically, forcing many small businesses to close their doors, especially due to their inability to get bank loans.  Now, as the economy begins to recover, small business owners are beginning to have positive outlooks for their businesses, but according to some experts, the bank lending drought may not be improving anytime soon.

“The U.S. Treasury Department is concerned the steady pace of bank failures could keep many small businesses from gaining access to new credit as the economy rebounds and companies seek to expand,” wrote Darrell A. Hughes, for the Wall Street Journal.  Hughes continued, quoting the Treasury’s chief economist, who said, “”We’ve been concerned that small businesses, which are particularly dependent on bank financing because they typically don’t access corporate bond markets, will face and have been facing difficulty getting credit.”

Based on this information, it may be necessary for small business owners to take advantage of alternative business funding methods.  Merchant cash advance lenders, for example, advance small business owners up to $500,000 based on their monthly credit card sales.  Therefore, they do not impose the requirements that the bank does such as excellent credit and collateral.

Some Discouraging Bank Lending Facts (Source: Wall Street Journal)

• Since the beginning of 2008, 192 banks have failed, with 27 coming so far this year.
• Total lending by U.S. banks fell 7.4%, the steepest drop since 1942.
• According to Raj Date, executive director of Cambridge Winter Center for Financial Institutions Policy, there will be a lending shortfall for small businesses of as much as $250 billion to $500 billion as the economy recovers.
• Date projected small businesses will likely begin feeling the crunch by mid-year, and it will last for the next two or three years.

Some Encouraging Merchant Cash Advance Facts

• Merchants can get up to $500,000 in unsecured small business funds
• Minimal requirements make it easier for small business owners to qualify
• Flexible repayment procedures allow repayments to go with the follow of business
• Accounts can be funded in as little as seven business days