Why Banks Are Not Providing Small Business Loans


Why Banks are not Providing Small Business Loans


Regardless of what you might be hearing on the news concerning the standing of small business loans, many merchants are still having quite a few issues with their loan applications being regularly rejected by big banks and sizeable lending institutions. It seems as though some banks are not providing as many small business loans to those who need it, at least not as much other establishments are. Some skeptical speculators are even saying that it is all an inarguable effect of the currently overwhelmed status of the global economy.

Small Businesses suffer the Consequences of a Weakened Economy

It no longer matters how strong a business and bank partnership has been, many otherwise reliable banks are saying no to small business loan requests. Despite the often monumental efforts of savvy small business owners, some bigger banks are still being reluctant to approve loans that are otherwise considered to be low risk. Even those loans applied for by merchants whose businesses have a squeaky clean record, small business funding sometimes becomes a nightmare filled with a mass of paperwork, mounds of red tape, and ultimate rejection.

Opportunity is knocking but many small businesses can’t answer the door to say hello. With real estate values plummeting, now is a great time for small business owners to buy properties for the purposes of expansion or renovation. However, none of that is easily possible when a bank won’t lend out any cash. So, some small businesses are having to grudgingly say goodbye to new and lucrative prospects.

Testing the Waters

Rightfully so, the general consensus among knowledgeable consumers after the recent recession is that the market could falter or crash at any moment. This underlying fear is what inevitably keeps the market undernourished, leaving it unable to bounce back under the pressure of a cautious economy. As a result, small businesses are experiencing lowered profit margins, a frustrating inability to expand, or a fight to remain relevant with inadequate resources for upgrades and equipment.

This produces the perfect storm of circumstances which ultimately render banks extremely reluctant to loan small businesses any amount of money. Although this is all especially true for newer businesses, some of the more established businesses are feeling the capital crunch as well. Nearly every single angle of the market has been negatively affected by recent global economic upheavals and uncertainty. Luckily, many experts are saying that there is still some hope for the future of small business.

Small Business Loans in a Jobless Economy?

It is no secret that several economists have tried to pin down exactly why the country is unable to create new and lasting jobs for its workforce. Some people believe that businesses are not hiring because most of the work is being outsourced to other regions of the world, leaving professionals fighting to stay relevant in a highly competitive market.

New regulations regarding these changes are thereby creating a crippling domino effect among bankers. This in turn is killing the interests of small businesses all over the globe. Add a righteous reluctance by small business owners to hire new workers because of an inability to expand, and you have a snowball that could inevitably grow to be too large for anyone to handle.

Comfort is Key

After the last recession it seems that only the bigger banks and lending institutions are willing to loan out any money. What’s more is that those institutions only seem to give loans to larger corporations. As private-sector employers begin play an increasingly important role in the status the global economy, banks’ reluctance to approve small business loans directly affects the status quo of the middle class. Obviously lenders need to feel more comfortable about things before the start giving out loans to small businesses again. Unfortunately, the incentives to do so are just not there for many of them.

As the economy begins to slowly bounce back a lot of small businesses are gaining more tread in the market by way of alternative loan options such as microloans and merchant cash advance. Wise merchants are taking the proverbial bull by the horns now, unafraid to be creative about the way they gain the necessary capital. Some banks may not be providing small business loans, but owners are still able to get the funds they need to remain successful - a true testament to the modern entrepreneurial spirit.