Liberty Bank of Utah

326 South 500 East, Salt Lake City, UT 84102
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Wednesday, July 18, 2012

Business Owners Turn to Bank Loans, Not Business Cards, for Financing

Small-business owners seeking funding now see bank loans as their first option, not business credit cards, says a June 2012 Pepperdine University study, reversing the findings of the same survey in 2011, when credit cards were seen as the business owners' first choice for loans.

According to the survey, which included responses from 6,000 business owners,  68% of those seeking financing in the next six months said they will pursue a bank loan. Business credit cards were the choice of 40% and 36% said they will look to a credit union or community development fund for a loan.

The study, conducted as part of Pepperdine University's Private Capital Access Index study, also found that of the respondents who were unable to obtain a bank loan, 67% said they thought the bank loan financing was still a good fit for them.

Owners of lower revenue businesses (less than $5 million) were found to be less optimistic about receiving financing from banks than owners of businesses bringing in between $5 million and $100 million.

The preference for bank loans reverses the sentiment business owners expressed in  the same study in December 2011, when only 37% of respondents said they had tried to receive bank loans in the past 12 months. The survey then found 49% of respondents sought to use credit cards.

Thursday, July 12, 2012

Small Banks Approving More Small-Business Loans

Small banks beat out their larger counterparts last month with a bigger jump in approvals for loans to small businesses, according to the Biz2Credit Small Business Lending Index.
A monthly analysis of 1,000 loan applications on found that loan approvals in June by banks with less than $10 billion of assets totaled 47.5%, up two percentage points from May and five percentage points from a year earlier.
Approvals by banks with at least $10 billion of assets, rose half a percentage point from May, to 11.1%, Biz2Credit said Tuesday. This also was significantly higher than the 8.9% approval rate recorded in June 2011.
"Small banks are the big story this month," Rohit Arora, Biz2Credit's chief executive, said in a press release. "They have made a lot of SBA 7(a) express loans, which used to be the strength of the largest banks."
The June loan approval rate for credit unions totaled 55.8%, down from 57.6% in May. Some credit unions reported that they had reached their yearly lending limit, which is roughly 12.3% of their total assets, Biz2Credit said.
Approvals from alternate lenders, such as accounts receivables financers, merchant cash advance lenders and mirco lenders, also decreased to 62.9% from a peak of 63.2% in May.
"When traditional lenders, get back into the game, it impacts the alternative funders, such as factoring and merchant cash advance companies, which generally charge higher interest rates than banks do," Arora said. "If banks are lending, small business owners are less likely to look for other options."