Misconceptions About Small Business Lending – What You Need to Know Now

By |2017-09-14T11:21:32-07:00March 13th, 2012|

One of the biggest misconceptions about lending today is that banks are not lending. As Bryan Moeller, Director of Small Business Banking at Wells Fargo, points out in our Access to Capital video, this is simply not true. “The reality is that banks are lending,” Bryan says. He goes on to say that in 2011 Wells Fargo lent out over $7.5 billion to small businesses, which was an increase in lending compared to their 2010 numbers.

Bryan’s thoughts are echoed by Deborah Cohen (Upticks in small business lending at Chase, Citi), writing for Reuters. Chase increased their small business lending to $17 billion to small businesses in 2011. This was a 52% increase compared to Chase’s 2010 lending numbers. In area specific news, Chase increased their small business lending in Illinois by 30%. 28,279 small business loans worth $1.18 billion dollars were made in Illinois in 2011.

Citi also saw an increase in the amount they were loaning to small businesses in 2011. They lent $7.9 billion to small businesses during the year, an increase of 30% compared to their small business lending numbers in 2010.

Writing for the American Express Open Forum, Courtney Rubin (Small Business Lending Up by 18 Percent) indicates that, “small business lending has hit its highest level in four years.” Between November 2010 and November 2011 there was an 18% increase in all lending to small businesses. This increase in lending seems to support the idea that small businesses have adapted to the economic climate and how they can get loans. Taking these loans has in turn increased the ways in which companies can become profitable. Businesses have also benefited from these loans by being able to stay open. 7% of businesses had to close in 2009, but that number is expected to drop to 3% in 2012.

Business credit has seen the greatest increase of all lending methods. Business credit as a lending method has increased to $62.8 billion. While much of this went to large and medium businesses, $2.8 billion was credited to small businesses.

The United States Senate has also signed several bills to increase small business growth. The different pieces of legislation are intended to increase capital formation for small businesses. Support for the bills has come from both the Democratic and Republican parties due to their attempt to increase jobs and benefit the economy. Of the bills, one would alter federal security laws that may prevent small business owners from gaining access to capital. A second bill would do away with the ban on general solicitation which has hindered access to capital by disallowing privately held businesses from advertising sales to investors. Crowdfunding could also benefit from another of the bills which looks to provide regulations for businesses looking for small investments from many different investors. Of these bills, the White House has specifically lent its support to the crowdfunding bill.

This news should be encouraging to small businesses looking to gain access to capital in the near future. Banks are lending so make sure to take advantage of small business loans. Along with this increase in lending from the banks, there are a number of other helps to small businesses making their way through the United States Senate.