Current State of Small Business Lending Going into 2016

tax3Is your business struggling to find funding? Finding small business financing is actually easier today than it was between 2008 and 2014, thanks to the economy improving, and the explosion of non traditional lenders that have emerged. These lenders challenge the status quo. While it is true that today it is still extremely hard to find a Small Business Administration backed loan, or an SBA backed loan, today’s small business owners can still find loans that suit their financial needs. The main reason being is that banks tend to only back loans which will bring them the most profit, and sadly banks today often pass over many of today’s small businesses.

While on paper it appears that banks are offering the most money to businesses, these stats can be deceiving. Big banking tends to only offer loans to the largest and most successful small businesses. Yet smaller banks and online lenders are the ones making the biggest ripples when it comes to lending to today’s small businesses. These lenders are aggressive when it comes to pursuing the business of Main Street entrepreneurs. While the dollar amount these lenders lend does not equal the dollar amount that big banking makes to small businesses, online lenders and smaller banks are making more loans to small businesses than big banking. This of course opens up the door for smaller mom and pop businesses which are pursuing small business financing.

Big banks top the list for lenders making loans of $1 million and under, but online lenders now top the list for small business lending for amounts of $150,000 or lower. Smaller banks are also at the top of the list of lenders making small business loans of $150,000 or less. The reason for these stats is that big banks are much more stringent when it comes to lending to small business. Big banks also require much more paperwork than online lenders do, they also have a longer approval time for borrowers who need funds today. Biz2Credit, which matches lenders with small businesses seeking business financing, found that big banks approved borrowers applications only 17.8 percent of the time, while small banks had approved a whopping 50.9 percent of all small business loan applications through their lending matchmaker platform.

Statistics prove that loans being made to small businesses for under $150,000 are diminishing when it comes to big banks. It is only larger dollar value small business loans that have seen a boost when it comes to small business lending through traditional lenders, or big banks. Big banks reluctance to approve of smaller dollar value small business loans has opened up the door wide for smaller players, who are now dominating the small business lending industry when it comes to loans under $150,000. Some big banks have taken notice of the success of these lenders, and some of these big banks have begun to re-evaluate their lending practices. Indeed in 2015 big banks have started to slightly ease lending requirements, and loan amounts of small dollar business loans are again increasing, but not at the level that smaller banks and online lenders are making. This does not even include peer to peer lending and private investors, who are also making their mark in the small business lending field.

This means of course that today, thanks to the playing field having been changed that today’s smaller business owners have a greater chance at securing funding than they did from 2008 to 2014. If you are seeking small business financing, and have only looked at big banking for your needs, now is the time to take a second look at small banks and online lenders. Your small business competition is already making use of this alternate financing route. Not only is the entire loan process easier when it comes to securing a loan through online lenders and smaller banks, it is also much quicker. Small banks today are also aggressively going after SBA backed loans, the incentive being is that they are easier to sell on the secondary market to investors. This secondary market includes pension funds, hedge funds, and private investors looking for low risk deals.

If you need small business financing, this could be the year for you to find a much needed cash infusion via a small business loan. We feature reviews on this website of some of the top small business lenders for small dollar business loans, in an effort to give you a head start on finding the perfect lender for your small business needs.