New York Fed report shows tightened credit

Jessica SarterSmall Business Lending

Several recent reports have shown a marked decrease in the availability of small business loans over the last two quarters, which could be viewed as bad news for existing companies and new entrepreneurs. While economic growth has continued an upward trend, credit availability has tightened, leading many lenders to ease their loan standards.

Last week, the Federal Reserve Bank of New York released its Small Business Borrowers Poll, which questions 500 businesses in the region to determine the availability of financing. The report showed that small business owners continued to have trouble finding adequate financing, though demand seems to be rebounding.

According to the New York Fed, the months leading up to the poll saw a drop off in loan applications as well, while approximately 50 percent of those firms that did not apply for loans said that they did not believe they would be successful finding loans.

Further, the data gathered suggested that more than 60 percent of the firms that did apply for loans obtained some sort of financing. However, 36 percent received only a portion of the credit they asked for – not the full amount. The number of firms that cited receiving the entire desired loan amount only made up 13 percent of the whole.

The agency purported that there will be a marked increase in loan applications throughout the coming months, especially from those firms that did not acquire the full amount, or any, of the loan amounts requested. It also expects those firms that did not apply out of fear of not obtaining the loan – which used alternative forms of financing – to eventually begin the loan application process.

The U.S. Small Business Administration Office of Advocacy’s most recent Quarterly Lending Bulletin further cemented the idea that small business lending has suffered in recent months. According to the agency, the first quarter of this year saw a marked decrease in both disbursement volumes and total amounts of loans outstanding.

This marks a consistent downward trend of small business loan disbursement volumes, as the SBA released a report last month that showed small business lending dropped off substantially in 2011. Since much of the analysis is derived from the amount of loans outstanding, though, the exact potential cause remains difficult to define.

Some experts have cited these statistics as signs of improved financial responsibility on behalf of small businesses, while others indicate this is a sign that credit availability is simply too tight to get the necessary funding to all prospective borrowers.

Regardless of the reasons for the drop off in lending, substantial support structures are available to support small businesses, especially in finding adequate financing.

If you are in the market for a small business loan, consider using a service like BoeFly. When lending is tight, this firm provides the most efficient loan application process that yields the best results.