Small Business Lending is Still Tight

Federal Reserve Banks of New York, together with Atlanta, Cleveland and Philadelphia had been conducting the Small Business Credit Survey and have just recently released the results on January 15.

The good news is the amount of credit available to small businesses continues to recover. However, it is still lesser compared to the credit supply available before the recession, especially for businesses with less than $1 million in revenue.

Cleveland Fed has the same conclusion when they put out their own report earlier this month.

bank lending cleveland fed
Report by Cleveland Fed

“Small business loans now stand 17 percent below the peak reached prior to the recession.
While small commercial and industrial loans grew 3.4 percent over the past year, this modest
improvement does not provide strong assurances about the health of lending in this space. In
contrast, lending to larger businesses (loans greater than $1 million) bounced back quickly
and loans outstanding are now more than 24 percent higher than pre-recession
levels.” – Cleveland Fed

The highlights of the small credit survey are as follows:

  • About 25% of small businesses hired new people in 2014.
  • 15% of small businesses got smaller.
  • 22% of over 2,000 small business had applied for loans during the first six months of 2014.
  • 54% of those who applied were given a portion of what they sought for and one-third were fully
    funded.

  • Attracting customers is the biggest problem faced by all small businesses during the first six
    months of 2014, which tells us that they had greater problems with demand than with supply.

  • The second problem is having lack of credit.
  • Other problems faced by the small businesses include uneven cash flow, increased cost of running
    the business, as well as complying with government regulations.

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