Businesses Have a Tougher Time Obtaining Credit

[Oct 5, 2007.]

Small business owners are finding it more difficult to obtain credit these days. In some cases, business executives are being turned down for loans. In other cases, changes are being made in the reporting standards for their lines of credit.

The reason for the decline in the issuance of credit appears to be the continuing housing crisis, which shows no signs of abating anytime soon.

Even in the best of times, it can be difficult for a small business to secure credit. But, with the real estate market reeling from so many defaults, the road to obtaining a small business loan is a rougher journey than ever.

For the most part, small businesses are most likely to obtain credit from small community banks. Large national banks are far less likely to extend credit to a small business.

Anecdotal evidence of the credit crunch has been born out in statistics collected by the National Federation of Independent Business, an organization which represents the interests of small businesses nationwide. The group found that 7% of those small business owners surveyed said that loans were more difficult to obtain in recent months. In July, the figure stood at 5%.

Still, even though loan refusals for small businesses may be on the rise, the vast majority of businesses appear to be faring well, despite the troubles in the credit sector. That's good news for those concerned that recession could reappear on the horizon.

Yet, there is also evidence that banks are being more careful, both with respect to loan standards and the people they're willing to do business with. Some franchise owners report that they have had difficulty obtaining loans, despite their willingness to keep current on loan payments.

Even those small business owners with stellar credit histories may find it difficult to obtain the type of credit they're looking for.

Julie Ann Amos
October 5th 2007

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