Nov 15, 2013 Sean Albert
The turbulent economic situation in the United States has caused several difficult time periods for small business owners, most notably the Great Recession. Entrepreneurs were able to relieve some of their credit accessibility troubles with alternative financial services during the financial crisis, and these same resources continue to play a major roll in small business lending today.
Biz2Credit recently released its latest Small Business Lending Index for October, which revealed that credit unions, big banks and small financial institutions all decreased their approval ratings when compared to September. The government shutdown is believed to be the biggest catalyst for these weaker performances among traditional lenders, as concerns plagued the financial sector when officials in Washington announced the decision.
However, much like during the Great Recession, alternative lenders had the exact opposite experience in October. According to the index, alternative lenders increased their approval rates to 67.3 percent in last month, up from 63.2 percent in September and a new record for the report. This is compared to approval rates at big banks, which dropped by nearly 20 percent to 14.3 percent from September to October, and credit unions, which experienced a 4 percent decrease.
The report's authors explained that the lack of U.S. Small Business Administration loans and general access to cash flow among traditional lenders caused these drops. Additionally, Rohit Arora, Biz2Credit's CEO, stated that the shutdown and lack of traditional loan access fell during one of the busiest times of year for small business owners who are in need of financing.
This is more evidence that entrepreneurs should always examine all of the possibilities available to them before signing on for a loan product. With an ever-expanding variety of options, sometimes alternative loans will be the best suited to an entrepreneur's specific corporate needs.