06/21/13

Small Business Lending: The Good, The Bad, and The Ugly?

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We’ve spent the week celebrating Small Business Week here at Lendio. It’s been exciting to see so many of our followers jump on board and share their enthusiasm for small business with us.

It goes without saying the last few years have been challenging, but nonetheless, there are a lot of very positive things happening. But better doesn’t necessarily mean perfect. 2012 was still a relatively tough year for many small business owners looking for financing—especially those going to the bank with less than exceptional credit or limited time in business. Nevertheless, the influx of non-traditional lenders stepping up to fill the gap for borrowers looking for smaller loan amounts, or who might not meet the credit requirements of their local bank, is a trend I think is good for small business owners. And, I think we’ll see that trend continue to grow over the rest of 2013.

We’ve also noticed more community banks like New England’s Eastern Bank get more jazzed about online lending. I’m convinced in the future we’ll see more of this as banking becomes less about “where” your bank is and more about whether or not they’re interested in giving you a loan. Social tools and attitudes about doing business online have changed dramatically over the last few years and I expect that will drive change regarding how community bankers interact with small business owners as they strive to keep their institutions relevant while their less visionary colleagues are consolidating and closing branches.

The news is really good for companies that are clearly creditworthy. If your small business is established (been around for four or five years), has a positive cash flow and a good credit rating, you’ll find bankers hungry for your loan business. It also looks pretty good for small business owners looking to purchase a franchise—provide the franchise is listed on the SBA’s approved list and you have personal assets you can use as collateral.

Along with the good news, one of the biggest challenges I see is how the SBA, and consequentially, everyone else in lending categorizes small business. Earlier this week, Lendio Co-founder and CEO Brock Blake published an article on Forbes that decries the way Main Street businesses are lumped into the same “small business” bucket as larger firms that have up to 1500 employees and do $30 or so million in revenues. One of the reasons alternative lenders are doing so well right now is that it’s not economical for the banks working with the SBA to offer the smaller loan amounts sought by many of the small businesses you’d find on Main Street.

I don’t think I can really say anything is ugly—in fact most of it is good news. It will be interesting to see what happens during the second half of 2013. My hope is that the banks that claim they are motivated to provide small business loans are willing to lend to the business owners who have survived the recession, but maybe not unscathed as they’ve spent the last four or five years robbing Peter to make sure Paul gets taken care of.

At Lendio, we’re seeing a good trend as more and more small business borrowers are getting matched to lenders excited about helping them fuel their American Dream. If you’d like to complete a profile to see your matches, click HERE.

IMG_3366Small business evangelist and veteran of over 30 years in the trenches of Main Street business, Ty makes small business best practices, tips and advice accessible by weaving personal experiences, historical references and other anecdotes into relevant discussions about leading people, managing a business and what it takes to be successful. Ty also shares his passion for small business every week on Forbes.com.

Author: Ty Kiisel | Google+

 

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About the author

Ty Kiisel
Small business evangelist and veteran of over 30 years in the trenches of Main Street business, Ty makes small business financing and trends accessible in common sense language devoid of the jargon.

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