Small Business Lending Remains Challenging for Smaller Dollar Amounts

August 12th, 2014
in econ_news, syndication

from the New York Fed

The Federal Reserve Bank of New York today released its Small Business Credit Survey, a representative survey that highlights the credit experiences of small businesses in New York, New Jersey, Connecticut and Pennsylvania. Survey results highlight rising business costs, including financing costs, and high credit application costs, which may explain why lending in lower dollar ranges - under $1 million - has stagnated. The findings also indicate widespread interest in new financing types and new, nontraditional lenders.

Follow up:

Key findings include:

Small firms report rising costs, including financing costs, as key growth challenge in 2013

  • Two in three firms experienced increasing costs of running their business and a quarter said it was their biggest growth challenge
  • Two in five firms reported increasing financing costs
  • The number of firms reporting being priced out of credit markets increased to 5 percent in 2013 from 3 percent in 2012

40 percent of firms applied for credit in 2013 - not a significant change from 2012

  • Lines of credit and business loans continue to be the most sought after credit products with 70 percent and 52 percent of applicants seeking each product respectively
  • While 39 percent of applicants sought credit to cover day-to-day operations, 30 percent sought credit to expand their business or make capital investments – a significant increase from a year ago

Firms continue to report small credit needs and high application costs

  • Most applicants sought relative small loans: 90 percent sought under $1 million and 51 percent under $100,000
  • Applying for credit is time consuming – on average firms spent 33 hours applying for credit, contacted three financial institutions, and submitted three credit applications

Overall approval rates remained constant from a year ago; credit market continues to be favorable for profitable and experienced firms

  • 58 percent of applicants received at least some of the credit they applied for in 2013 – not a significant change from 2012
  • 37 percent of credit applicants were profitable, down from 44 percent in 2012; however, 76 percent had credit experience, up from 69 percent
  • Experienced and profitable firms typically sought larger loan amounts, had higher approval rates, and faced unchanged or decreasing financing costs

Credit demand will remain strong in 2014

  • 37 percent of firms plan to apply for credit in 2014 and 17 percent have not made a decision
  • Applicant pool likely to increase: fewer firms reported having sufficient financing and being debt averse in 2013
  • More than half of unsuccessful applicants and non-applicants report interest in exploring new financing types and contacting new lenders

About the Small Business Credit Survey

The Small Business Credit Survey (SBCS) is a semi-annual survey of establishments conducted by the Federal Reserve Bank of New York’s Outreach Team, reporting information about business performance, financing needs and choices, and borrowing experiences. Responses to the SBCS provide insight into the dynamics behind aggregate lending trends and shed light on noteworthy segments of the small business credit market (as reported by borrowers). The SBCS captures the perspectives of businesses with fewer than 500 employees in New York, New Jersey, Connecticut, and Pennsylvania. Results are weighted to reflect the full population of small businesses in the four states of coverage.

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.

 navigate econintersect .com


Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved