Are Small Business Loans Coming Back to Life?

Although the global economy has been in a slow spiral over the last few months, it seems that small businesses are pulling America back up by her boot straps one company at a time. Along with hard work and a survival instinct, small businesses are looking for financial resources such as small business loans to fund growth initiatives. But who’s lending and what are small business owners experiencing when trying to obtain loans through traditional banks and financial institutions? Let’s take a look at what’s trending now in the US market.

Despite the Federal Reserve and its attempts to increase cash flow over the last few years, which failed to produce satisfactory results, there’s hope on the horizon as it’s now becoming less difficult for some small businesses to obtain loans. Some lenders are hesitant to give loans to already struggling businesses, or those that have suffered the loss of employees due to downsizing. Others won’t even consider a business that has cash flow or credit challenges. This is to be expected, given the ups and downs of the early part of this decade.

The lack of traditional funding sources has had a direct effect on unemployment levels, which are holding fast just below 10% in most states. However, even with these challenges, over half of the new jobs in America have been created by small businesses. In fact, according to the U.S. Dept. of Labor, Bureau of Labor Statistics, “small firms accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009.” There’s no denying that without the efforts of small businesses, this country would be in an even sadder state.

Chris Hurn, CEO and Cofounder of Mercantile Capital Corporation, a commercial real estate lender, sees the small business sector “coming back to life.” His firm is lending to more and more small businesses, and he’s seen his loan production “increase dramatically over the past two years.” In 2010 alone, Mercantile Capital Corporation saw an 80% increase in loan closings, and he “expects 2011 to be even better for small business clients.”

While Hurn agrees with many financial experts that “conventional financing is still difficult for small business owners” and “SBA loan products are becoming first choice options” for small businesses who want to grow. Overall, Hurn says that he firmly believes “[small] businesses must come back to life and start growing and flourishing again if we hope to truly get our economy back on track.”

During the recent financial crisis, particularly because of the shortage of available jobs, there was a boom in the number of new small businesses started by average Americans. In the years preceding the economic recession, we saw on average 500 to 600 thousand new businesses incorporating annually in the USA, with over half of those consisting of small businesses and sole proprietors. These numbers continue to rise with an expected 700 thousand new businesses forming in 2011.

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From a small business owner’s perspective, what has the small business loan process been like in recent months? Ask Logan Hale, Owner and Founder of YourLittleFilm.com in Los Angeles, California. This family-owned business that creates films for families and businesses needed an equipment upgrade, so they went to their local bank for support. Overall, Hale says his experience “was really positive – I felt like the bank was encouraging about the loan.” Hale was comfortable working with his long-term banking representative to guide him through the process. Hale stated “He was very helpful in structuring [the loan] in a way that made sense and got the loan approved.”

Hopefully, the recent motion by Wall Street’s biggest banks will set the wheels moving in the right direction so that more small business owners like the Hales can benefit this year from faster loan processing. For the millions of small business owners in America, news like this is going to make the positive difference in communities hit hard by job losses in 2009 and 2010.