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As small business lending increases, companies have more options

Feb 11, 2013 Sean Albert

In Louisville, Kentucky, small businesses experienced plenty of success in 2012, largely on the back of increased short term lending. However, unlike in past years, these companies are finding that they have many options to turn to other finances. 

"Our entire goal is to be an adviser to our clients, and that has played a role as well," Sam Castle, a Louisville business banking manager, recently told Business First. "Small business owners want to know that a bank understands its business. We really push to get out there in front of our clients."

In 2012, U.S. Bank increased lending to small businesses by 25 percent compared to 2011, a total of more than $15 million. Castle told the news source that he expects this number to grow again in 2013. 

In general, smaller companies throughout the United States have had an easier time securing funds. A recent small business lending index by Thomson Reuters and PayNet revealed that borrowing in October 2012 achieved an 11 percent year-over-year growth. As a result, the index jumped from 96.4 points in September to 107.5 in October. 

One of the reasons small businesses are feeling better about lending is that they have significantly more options that before. According to a separate study by Biz2Credit, alternative lenders pushed through more than 63 percent of loan requests in 2012, including nearly 64 percent in December. At the same time, banks appear to be easing up their restrictions.

"After a hiccup in November, big banks are coming back strong into the small business lending game," said Rohit Arora, co-founder and CEO at Biz2Credit.

While bank and credit loans eased their restrictions in 2012, they still lag behind alternative lenders. The report found that big banks accepted 14.9 percent of small business loan requests in December, while small banks approved nearly half of their requests. In addition, credit unions pushed through approximately half of small business loans in 2012.