Big Banks Decrease Loans to Small Businesses
Small businesses are having an increasingly difficult time receiving loans from big banks, even as the economy recovers. According to filings by the federal regulatory, 10 of the largest banks in the U.S. lent $44.7 billion in 2014, which is a 38 percent decrease since the 2006 peak of $72.5 billion. As big U.S. banks are making fewer loans to small businesses, the market for alternative lending has significantly increased.
Lending Shift for Small Businesses
In 2015, only 43 percent of business loans from January to August originated from U.S. bank loans. This change caused a major shift to how businesses seek the funding they need. Now, alternative lending has risen from 10 percent to 26 percent as alternative lenders have filled the demand for business funding. For those who aren’t seeking alternative lending, they are turning to business credit cards, which has amounted to $445 billion this year, an increase from $230 billion in 2006.
While loans for small businesses have significantly decreased, loans for larger companies with over $1 million in revenue have increased by 37 percent from 2008 to 2015. As a result, this has left small business owners essentially abandoned, forcing them to turn to alternative lending options.
Alternative Lending for Small Businesses
With tighter lending standards and high costs, small businesses are borrowing much less than the previous seven years. As U.S. banks have gotten more cautious about lending to small businesses, alternative lenders have stepped up to fulfill the demand for small businesses.
Alternative lenders are approving small businesses for loans, even those who don’t meet the requirements for traditional lending. Alternative lenders, like Business Loans Direct, are working with small businesses to keep the market strong as small businesses with less than 500 employees make up more than half of the private sector jobs in the U.S. according to the Bureau of Labor Statistics.
While traditional lending is no longer an option for many small businesses, they aren’t out of luck. Alternative lending provides the funds needed to move businesses forward while building strong economies through the private sector.
For those who are unable to receive a loan through big U.S. banks, call Business Loans Direct today to get the funds you need quickly.