The subject of small business lending always brings with it a wealth of opinions and when politics are involved, opinions are often strong and varied. The controversy involving lending has been the same since the often called Great Recession began: Should the Federal government do more to get money in to the hands of small businesses?
If we look at the results of a recent Reuters poll, it looks as if small business owners may be finding the money they need without the help of the government. In May, the money lent to small business in The United States was up an impressive 26% from the same time in May of 2010. This one statistics provides two key pieces of positive news: First, banks are feeling better about the sustainability of small businesses enough to let the money flow to them. Banks also feel more confident about their own business that they can loosen their standards.
Next and maybe even more encouraging, if small businesses are applying for small business funding, it is safe to assume that most of that money is going to expanding their businesses. Although some may be put towards refinancing debt, making payroll, and other defensive needs, there’s no doubt that a 26% increase in lending means businesses are much healthier and growing.
There were other encouraging statistics that came from this same survey. First, defaults were the lowest they’ve been in 5 years, adding further proof that businesses are healthier. Next, loans moderately delinquent were down to a record 1.95%.
The Small Business Administration has $30 billion set aside to loan to small businesses. This program is charged to lend money through local banks to deserving small businesses at a competitive rate. Banks receive the money at an interest rate as little as 1% but there’s an unfortunate reality to this money: Although 869 banks have applied to participate, not one dollar of that money has been used for its intended purpose.
There has been plenty of evidence of late that small businesses, responsible for 80% of the hiring the United States, are on the rebound and these latest figures from Thompson Reuters seem to back up the fact this fact. If none of those small business dollars have been leant out by the Small Business Administration, could this money be used for other purposes?
Surely, this is a question that politicians could debate for many months but the fact that small businesses are looking healthier is the exciting news to take away from the recent Reuters survey.