Owning a small business has never been easy, but it’s even more difficult when you can’t access low-interest loans that help you expand into new areas, and stay afloat in a challenging economic climate. Many businesses are feeling that squeeze because they can’t convince banks to take a chance on them.
Even successful small businesses face difficult review processes that can end in rejection. As the year continues, though, there could be more business lending opportunities.
Modest Growth in 2012 Business Lending Could Help Businesses
According to the American Bankers Association, business loans should increase by about 11.5 percent in 2012. They grew 9.9 percent in 2011. 9.9 to 11.5 percent isn’t a huge jump, but it’s light years better than the lending slump of 2008 and 2009. When banks are asking for government bailouts, a small business doesn’t have a very good chance of getting a loan.
In this economic climate, any growth in lending is good news. Unfortunately, an 11.5 percent increase in business lending is unlikely to drag the unemployment rate from below 8 percent. That’s bad news for everyone.
Will Business Lending Continue to Grow?
The American Banks Association predicts that business lending will fall to a 7.3 percent increase in 2013. In other words, the group expects business lending to increase, just not as much as it will increase in 2012.
This prediction, however, is based on several assumptions. It’s a good estimate, but only if you take a pessimistic look at the future. The American Bankers Association, for instance, assumes that certain tax incentives scheduled to expire in 2013 will actually expire. As everyone knows, Congress has a way of kicking the can down the road, especially when it means taking a strong, unpopular stance on something like tax increases.
That estimate also assumes that banks won’t decide that they want to make more money. Yes, lending money to businesses is a bit risky in today’s economy, but it’s also a significant source of revenue for banks. One must wonder how long banks can stick their heads in the sand before they finally realize that they can play an active role in the country’s recovery.
It will require some bravery and a lot of diligent research, but competitive factors should encourage some banks to start lending more, even if there is more risk than they want. After all, every business decision is a risk. It’s just a matter of weighing those risks against potential gains.