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Five Small Business Lending Trends of 2014

Aug 21, 2014

The economy is still trying to rebound from the effects of the Great Recession. The remainder of 2014 will continue to see small businesses struggling to access financing through traditional lending options.

We’ve put together a list, based on research from leading sources that shares insights on what may happen in the small business lending industry for the remainder of 2014. Some of these trends are very specific, while others are more broad and general.

If you’ve been considering financing for your small business, check out the following trends in the lending industry:

  1. Small businesses will continue to have difficulty accessing financing. Small business owners know how challenging it is to get bank financing. That trend is expected to continue in 2014. The Institute for Local Self-Reliance conducted a survey and found 42% of small business owners who needed a loan in the past two years could not get one.
  2. Big businesses will be able to easily access financing. While they can often use corporate bonds or stock proceeds, big companies will continue to be able to get loans when needed. This will happen because banks view bigger companies as less risky and having a lower chance of default.
  3. Alternative lenders will gain market share. Because banks are less willing to work with high-risk small businesses, alternative lenders will have a larger role in small business lending. An article at Forbes notes they will figure “…out new ways to underwrite the non-A-credit small businesses.”
  4. The SBA will fund fewer small businesses. By their own definition, the SBA funds small businesses. However, they’re getting away from funding very small businesses and aiming at more established companies. For example, its 2014 budget includes a line item for the “Emerging Leaders” program. This program aims to train leaders in established companies to grow their businesses even further. This budget proposal also cuts $10 million (9%) of its 2012 budget for grants offered to small business development center, according to a New York Times article.
  5. Crowdfunding gains momentum, but remains relatively unused. Banks had about $630 billion in loans with a balance of $1 million or less at the beginning of 2014. Micro loans, which have a value of under $100,000, account for less than 25% of all small business loans. While crowdfunding has gained popularity, it accounts for .002%, or about $1.26 billion of the total value of all small business loans (data according to Advocates for Independent Business). This trend is anticipated to continue for 2014.



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