Need a Small Business Loan? Your Options May Be Limited

Small Business Lending Showing Minimal Growth

At the conclusion of the first quarter of 2014 from January through March, banks held about $585 billion in small business commercial loans. While this is an increase of 1% from 2013, it’s still 18% under what banks held in 2008 prior to the recession, which was $711 billion. In another staggering statistic, small business lending numbers are still below those from a decade ago in roughly one-third of counties in the U.S.

Smaller Loans Disappearing?

In the small business world, the keyword is “small.” Yet evidence shows that loans of smaller amounts have been less available recently. The availability of loans valued at $1 million or less is down 14% since 2008. The number of loans currently sits at about 23.5 million.

Some Good News

All is not bleak in the business lending arena. Loans granted to companies of all sizes went up 9% to $2.5 trillion since the recession started 6 years ago. In addition, smaller banks seem to be increasing the number of commercial loans they offer compared to their larger lending counterparts. These loans increased 11% from July 2013 to July 2014.

Other Options for Funding a Small Business

Since small business lending has not been on the prettiest path toward a bright future over the past 6 years, it may be worth exploring other capital-raising strategies to pump money into a startup venture. These include:

• Using personal funds – If you have any extra income you could put into your company that would not hurt your financial situation, go for it. Just don’t put your hand into any of your important retirement plans and pull out too much money. This strategy is generally more appropriate for those with regular sources of income, such as a day job.
• Crowdfunding – If you’ve never tried crowdfunding, hop on one of the websites for it and throw your idea out there on a fishing line among potential investors. Those who are interested might bite and provide you with a decent amount of capital for your startup. The biggest advantage to crowdfunding is that it puts your idea in front of a worldwide pool of investors.
• Government grants/funding – Despite economic challenges in recent years, the U.S. government offers a variety of funding options to small businesses and nonprofits, including grants. Explore what’s out there at the local, state, and federal levels to find out if you can get in on some of this money.