Small Business Loans: hot… or not?

arrowsThe media is hungry for clues about the direction of the American economy. And as we know, small business is a key engine of this economy, providing 55% of all jobs and 66% of all net new jobs since the 1970’s, as well as 54% of all US sales.

Here are a few positive snippets from recent news:

U.S. small business optimism jumped in December to its highest level in more than eight years, the latest sign of strength in the economy even as dark clouds settle over global growth….The outlook was further bolstered by other data on Tuesday showing job openings approached a 14-year high in November.

But perhaps these headlines grabbed you:

So 2014, on the whole, seems to have been a good year for small businesses seeking capital from banks to grow…..But if you look at the numbers another way, you’d see that this increase is only telling part of the story. It’s a story of success mainly for small businesses seeking big money from big banks.

U.S. small-business lending never quite regained the ground lost during the Great Recession, ceding significant market share to larger firms that have benefited from a gradual but lengthy economic recovery, research from the Federal Reserve Bank of Cleveland finds.

Seems to be a mixed bag… so here’s some clarity. Big banks are stepping up to the plate for small business after almost 6 years of kicking them to the curb. But only in larger amounts. No surprise here: big banks make big loans to make big profits.

Where small business lending is growing is sub $150,000 loans, which many new online lenders are happy to provide – at massively high rates.

What’s still missing in the picture is the traditional meat-and-potatoes of the small business lending picture: community banks lending to small businesses in their communities.

Says Carly Fiorina in Inc. Magazine: “Unlocking capital is very important, and of course since the financial crisis, the surviving big banks have gotten bigger, but the community banking system is really struggling, and that means small businesses are struggling. It is community banks that provide most of the capital to small business, and [we need to] start unlocking small business loans again. We have got to get capital to them so they can form and thrive.”

If you want to learn more about small business loans, contact BusinessUS