The myth of credit for small businesses

Is lack of access to credit hurting small businesses?

  • close
    A pile of MasterCard and VISA credit cards are displayed in this file photo. Is the difficulty of accessing credit detrimental to small businesses?
    Jochen Krause / AP / File
    View Caption
  • About video ads
    View Caption
of

There is a myth that a lack of access to credit is what is holding back small businesses in our economy. Washington keeps trying to enact policies to increase the pool of funding available to loan to small businesses and to encourage banks to lend to smaller firms. But supply of funding is not the problem -- it is demand.

I participated in a conference call with Denny Dennis of the NFIB this morning that offered some information that showed the fallacy of the so-called small business credit problem from a new report recently released by NFIB.

His data shows that recent small business loan approval is actually up in 2010 when compared to 2009, but that demand for credit is still low. Small businesses do not want -- or I would argue need -- more debt right now.

Some interesting findings include:

  • Those who did not seek debt, were actually stronger financially than those who did seek new debt financing.
  • Most small business loans are tied to real estate (both business and personal), so the real estate crash has diminished the ability and presumably willingness to borrow more money.
  • Since sales are weak, business owners cannot generate the additional cash flow to cover new loans.

Add/view comments on this post.

------------------------------

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK