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KPMG: Executives optimistic about business lending

Aug 24, 2013 Sean Albert

Over the course of the last year, the American economy has been steadily improving as markets and industries return to healthy levels seen prior to the Great Recession.

As businesses become more stable financially, executives may start to plan for expansion and development, which could drive the economy. In many cases, a growing enterprise needs to obtain additional capital to implement planned expansions, which is why a solid lending environment is a necessity.

Fortunately, corporate leaders across the country are expressing optimism regarding the potential for lenders to support business growth for the rest of the year. A recent survey of roughly 600 financial executives conducted by KPMG found that 73 percent of business leaders have a desire to obtain more corporate capital this year. In fact, the source reported that the majority of C-suite respondents believe that loan activity will be beneficial for credit markets in the coming months.

"Supply and demand imbalance has set off a wave of opportunistic deals - primarily refinancing, re-pricing and dividend recap deals," said Ray Kane of KPMG's Capital Advisory section. Issuers and private equity sponsors, especially, continue to take advantage of strong liquidity in the market."

Potential pitfalls for lenders to note
Despite the positive outlook many fiduciary leaders hold regarding lending activity in the coming months, the source outlined the concerns that they have about the market.

Twenty-eight percent believe the biggest potential threat to lending health is the possible formation of a bubble-like sector created by a focus on yield. Also, 23 percent believe geographic instability could be detrimental, while an equal 23 percent are concerned about the inflation rate. Just 14 percent view lax standards for analyzing credit reports when extending loans as a barrier to robust lending.

Short term lending options
Many enterprises often opt to apply for loans from large banks and traditional financial institutions. However, the latest Biz2Credit Small Business Lending Index showed that alternative lenders are the most viable source of borrowing for small firms.

Overall, 63.2 percent of small business loan applications to short term lenders were approved in July, compared to just 17.4 percent from big banks.

These emerging financial enterprises offer some of the most flexible loan products on the market for businesses of all sizes. Typically, loans from small dollar lenders can be obtained in a fraction of the time it takes to process a loan at a big bank. For enterprises seeking immediate funding, short term outlets are a great option.