Why Small Business Lending Isn’t What It Used To Be

Do you remember the Great Recession? That sharp downturn in economic activity that took place during the late 2000s, was a dark time for many of us, especially the small business owners or those who had plans to become entrepreneurs.

Now, nearly a decade after the worst that the Great Recession could throw at us, it’s impossible to deny that things are looking quite better. For many business owners, the economic downturn now seems like a distant memory, but one of its worst symptoms still lingers if you know where to look for it. We’re talking about how the Great Recession changed small business lending and how it continues to shape the difficulties that many would-be small business owners face when seeking lending solutions.

Keep reading for a discussion of why small business lending just isn’t what it used to be and how the asset-based lending and other financial solutions offered by The Commercial Finance Group in Atlanta can provide a convenient alternative if you’re having trouble getting the capital you need from other financial institutions.

How Bad Did It Really Get?

Because it can sometimes be hard to remember just how bad things got for those seeking commercial loans during the Great Recession, let’s take a brief look back at some of the statistics about loans for small business during those years.

“…in the fourth quarter of 2012, the value of commercial and industrial loans of less than $1 million—a common proxy for small business loans—was 78.4 percent of its second-quarter 2007 level, when measured in inflation-adjusted terms. And despite an increase of nearly 100,000 small businesses over the period, the number of these loans dropped by 344,000 over the 2007 to 2012 period,” reports the Federal Reserve Bank of Cleveland.

Why Are Small Business Loans So Important?

While the inability to get small business lending is surely depressing for those who wanted to open a business during this time and caused them to delay their plans, you might be wondering why this particular effect of the Great Recession was such a big deal. This reluctance of banks to lend money for small business establishment or growth perpetuated economic depression (i.e. delayed recovery) because of the massive role that small enterprise plays in health of our local, state, and national economies.

“Small businesses employ roughly half of the private sector labor force and provide more than 40 percent of the private sector’s contribution to gross domestic product. If small businesses have been unable to access the credit they need, they may be underperforming, slowing economic growth and employment,” continues the Cleveland Fed. So much for giant corporations being the “job creators,” eh?

What’s Happening Now?

Unfortunately, the gun-shy banks have allowed this reluctance toward small business lending to linger, creating a massively underserved market that wants financing but simply can’t find it. The good news is that this has given rise to new solutions for lending created by alternatives to the traditional financial institutions.

According to the Department of Treasury, the top online alternative lenders “originated about $1.9 billion in small business loans last year