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Small Businesses Are Borrowing Again

November 23, 2009 by Sarah Leave a Comment

SMB owners are borrowing money again, or so says a study conducted by PayNet Inc for Reuters. The study found that smaller “microcompanies” are gaining confidence in their business and enjoying an overall improved financial health, which is good news for the economy. These businesses are often thought of as the best hope for job creation during economic recovery.

According to the study, which examined loans, leases, and lines of credit activity, businesses with less than $100,000 in outstanding debt are borrowing cautiously to invest money into their own companies. Financing originations are still down but they are no longer failing faster than the originations for larger small businesses (or those who have debt totalling above $100,000). This is an improvement over the last three years.

“This looks like an inflection point,” William Phelan, the president of PayNet, said of the study. “These little businesses are a leading indicator and the signals they’re sending are improving.”

Another encouraging sign is that delinquencies among these companies peaked at some point during the spring of this year, but have since began to improve. Phelan says a correlation can be made between microbusiness borrowing delinquencies and GDP and that makes for another encouraging sign.

Currently, most recovery efforts have come from a government stimulus effort, including the auto industry’s “cash for clunkers” and $8,000 tax credits fro first-time home buyers. But experts say a true recovery must come from private industry and customer demand, particularly small businesses.

And while critics have blasted banks who received government bailout money for not turning around and investing the money into the economy, several big banks have recently announced plans to do more small business lending. These institutions include Citigroup, J.P. Morgan, and Goldman Sachs.

PayNet provides risk management tools to the commercial lending industry. The company collects real-time loan information, including orginations and delinquencies, from over 225 leading U.S. capital equipment lenders and its proprietary database encompasses more than 16 million old and new contracts worth about $700 billion.

TD Bank Tops Small Business Satisfaction

October 22, 2009 by Sarah Leave a Comment

According to a summer study done by J.D. Power and Associates, TD Bank ranks as the top national bank for small business satisfaction. Of over 7,200 nationwide small businesses with an income of $100,000 – $10 million, TD Bank scored highest on a 1,000 point scale. TD Bank scored a 740. This is the third consecutive year the bank has ranked at Number One. The businesses surveyed indicated that they are more satisfied with a bank when a manager is dedicated to their account, understands their business, and is a thorough communicator with the business owner.

“The highest-ranking banks perform well in customer service and relationship management with their small business customers, particularly the in-branch experience,” said director of banking services at J.D. Power and Associates, Michael Beird. The average score for other banks was about 696. BB&T and Huntington National Bank tied for the number two spot with 725 points.

TD Bank is based out of Portland, Maine and Cherry Hill, New Jersey, and offers banking, insurance, brokerage and investment banking in Connecticut, Delaware, Florida, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Vermont, Virginia and Washington D.C.

Small Business Credit Crunch Deserves Attention

December 10, 2008 by Etha Walters Leave a Comment

Frustrations grow as the nation’s big three auto makers line up for another $17b. As the federal government focuses on damage control at the macro-economic level, it has ignored the micro-level small businesses. Meanwhile small businesses with stellar 800 credit ratings out of 850 cannot get a loan or their credit line has been reduced. Some economically respectable small businesses have had their credit lines cut in as much as half. Despite the fact as large companies are downsizing and outsourcing, small businesses have become the principal job generators in this country, accounting for almost all the net job gains in the United States.

A credit crunch on this job-generating sector of our economy should be a key part of any economic recovery plan and small business advocates have approached Washington on this very issue. Their quest was to meet with the Federal Reserve to ask for a relative pittance, $13 billion in bailout money, to go to the Small Business Administration to guarantee loans and provide small businesses with technical assistance. The SBA has had its budget slashed drastically over the past 30 years and by nearly 30 percent during the current president’s terms alone. Their quest is a hopeful one as their hard work may leverage as much as $620 million for small businesses if a bill authored by Sen. John Kerry to provide SBA loan guarantees is passed and signed into law.

Entrepreneurs, along with the rest of the country, await the inauguration of a new President with an ambitious agenda. Obama’s inheritance of a badly wounded economy has become first priority and has already with his experienced team set down to put plans to work. Two important elements will undoubtedly be job and economic growth. President-elect Barack Obama and the new Congress are likely to view an economic stimulus package as a critical tool for restoring confidence in the economy.

The stimulus package expected pass, likely to hit $300 billion, and it is possible that a piece of it is passed before President George W. Bush leaves office. It is expected to see aid to states and cities facing budget shortfalls, extended unemployment benefits and food stamps, and big infrastructure spending. Overcoming pessimism that currently overshadows the markets and economic decision-making will require some symbolic moves. It is encouraging that so far, the President-elect seems to be surrounding himself with experienced advisers, many are from the Clinton Administration, who are seasoned pros who have been there and who understand the importance of business.

While help with the economy slowly trickles down to small businesses, cutting costs and pinching pennies can be stressful, and could use some support along the way there is no doubt that the resilience of small businesses is the steadfast heartbeat of America at it will survive.