James Cummings, the author of numerous books in the management space and Founder and CEO of www.dailyposts.co.uk. If you’d like to submit a guest post to Money Q&A, be sure to check out our guest posting guidelines.
28 million small businesses in the United States account for 54% of all sales in the country, are responsible for providing 55% of all jobs and 66% of new jobs since the 70s, and have added 8 million new jobs since 1990. With statistics like these, you might wonder why it’s so difficult for small businesses to secure loans from the big banks. Big banks are the preferred source for loans because they can afford to issue loans at lower rates than smaller banks, yet they are more frugal and more protective of their money.
Findings from a survey conducted by the Federal Reserve Banks of Atlanta, Cleveland, New York, and Philadelphia show that only half of the small businesses that requested for business loans in the first half of 2014 were able to get any funding. Ironically, the banks need these small businesses as much as the small businesses need them, especially with the rising trend of online lending. Yet, this does not seem to make much of a difference.
The recession was the worst for small businesses in need of loans and while many expected the tide to change once the recession was over, that hasn’t been the case. In fact, since the beginning of the recession, we have seen a decline of 20% in the total dollar volume of loans from banks to small businesses. What’s more, the figures seem to keep declining even further.