It’s been a long time coming. At times, the great freeze in small business lending felt like a glacier, one so massive it threatened to crush mom and pop stores across the country.
Unfortunately, not all lenders have been like our friends over at Direct Capital, who have seen their lending volume boom over the last couple of years. By and large, banks and independent lenders alike have hunkered down and slashed their lending volume, fearful of overextending themselves and loaning money to companies who might struggle to repay it. It’s true from traditional lenders and for business-to-business lending, alike.
That appears to finally, mercifully be changing. Let’s go to the Washington Post with our latest report from the front lines:
The overall volume of loans to small companies rose 12 percentage points in May, marking the largest month-to-month increase in three years and nearly erasing four consecutive months of decline to start 2012, according to the latest data released by Thompson Reuters and PayNet.
The usual caveats apply about this being just one month, but this could not possibly be more encouraging. A 12 percent jump is large in boom times and gigantic in lean times, and we’re not entirely out of the lean times just yet. Consider that the rate at which small businesses are paying back those loans is higher than it has been since 2005 and you’ve got a winning combination.
Where do we go from here? Hopefully, this is going to become a self-perpetuating cycle. As more small business owners get access to the lending they need, they’ll be able to grow their businesses, ensuring they can then pay those loans down. If businesses are able to keep up with their payments, lenders should feel more confident about their lending and make more funds available. The upshot of getting that cycle going is tremendous.
What are your expectations for lending in the year ahead?
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