Borrowing And The Small Business


For many small and medium size businesses, borrowing money to pay for new equipment, expansion, new hires, or even the monthly payroll, is a reality.  But, more and more of those businesses find it hard to go to a traditional bank for their loan, preferring to seek a different alternative.  And, although many of those businesses can find loans for a comparable rate, some of them are finding it hard to pay them back.  According to economists, small business borrowing is a sign the economy is growing, but if those businesses cannot pay their loans back, are they hiring too many people? 

For more about small business finances, follow the links below.

US small business borrowing up, as are delinquencies: PayNet

Borrowing by small U.S. firms rose in August, in part because the month had more business days than July, and the percentage of firms late on repaying existing loans also increased, data released on Tuesday showed.

The Thomson Reuters/PayNet Small Business Lending Index rose to 133.7 in August from an upwardly revised 123.1 in July, which had three fewer working days. Borrowing by companies in most industries, except construction and recreation, fell.

“It’s malaise, rather than freefall,” said Bill Phelan, PayNet’s president.

Companies also struggled to pay back existing debts, PayNet data showed. Loans more than 30 days past due rose in August to 1.63 percent, the fifth straight monthly increase and the highest delinquency rate since December 2012.

The figures come as the Federal Reserve mulls the timing of its next rate hike. Higher interest rates tend to slow economic growth. Movements in the index typically correlate with movements in gross domestic product growth a quarter or two ahead.

Finding Cheap Loans Is Getting Harder For Small Businesses Around the World

It’s still tough out there.

Small businesses are increasingly having to pay more for their loans, according to a new survey that examines credit constraints for more moderate ventures across the U.S. and Europe.

Only 48 percent of small- and medium-sized businesses said they can get financing at rates below 8 percent, according to a new survey from C2FO, a financial technology startup that has created a marketplace where small- and medium-sized businesses can get paid early by the large companies they supply. The inaugural such survey, released last year, showed nearly 60 percent of respondents were able to secure funding at rates below 8 percent.

The survey comes despite benchmark interest rates hovering at record lows, particularly in Europe where the central bank has begun buying corporate bonds in an effort to lower borrowing costs. Regulation introduced after the 2008 financial crisis, as well as a continued wariness of riskier loans, is often said to have made small business lending less attractive for banks, encouraging a host of new entrants eager to grab a slice of the market.

How SMBs — And Their Lenders — Brace For Regulation

As the fluctuations within the small business lending industry continue, SMEs must keep their eye on the state of the market: whether capital is available, how affordable it is and where it’s coming from.

Marketplace lender Bizfi released today (Sept. 13) the results of its research on how small businesses are managing the changes made to how they access financing. And in an interview with PYMNTS, Bizfi Founder Stephen Sheinbaum offers his own take on how alternative finance players are managing those changes, too.

What SMEs Face

According to Bizfi’s Small Business Growth Survey, demand for financing from alternative funding sources is at a “record high.” More than two-thirds of companies surveyed said they prefer to seek loans from alternative sources rather than traditional banks. Less than a third of small businesses plan to seek a bank loan from a local bank, while nearly 28 percent said they’ll use a credit card or line of credit for their financing needs.