“More than three years into the economic recovery, the number of small business loans stands at three-quarters of its 2008 peak. National data show that the number of small business loansdefined as $1 million or lessdeclined by 4.7 percent in 2011. A closer look reveals that most of the recent decline was due to a drop in the number of microloansthose less than $100,000. While lenders report easing credit standards for large and medium-size firms, loan standards for small businesses have not changed in the last four consecutive Federal Reserve Senior Loan Officer Opinion Surveys. As part of its regional and community outreach, the New York Fed monitors credit conditions by asking small business owners about their credit needs and experiences. In April/May 2012, we heard from 544 small businesses. Evidence from small business owners suggests that the recent drop in lending may be due in part to weaker firms self-selecting out of the credit market. Fifty-nine percent of firms did not seek any financing during the last year. Half of the non-applicants said they did not apply because they did not think they would be approved. However, the poll also suggests that the drop in microloans is not wholly due to lack of demand. In fact, applicants expressed strong demand for microloansbut firms also reported higher denial rates for these loans than for larger amounts.”
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