Is Recovery in the Cards for Many Small Businesses?

Posted by on May 5, 2011 in Business Financing, Financial Services [ 0 Comments ]

It isn’t rocket science that small businesses make America’s financial engine run. Anyone who thinks otherwise is advised to go back to school and take a Basics of Business 101 class.

Given the financial downturn, the nation has grappled with the last few years, many small businesses were forced to lay off employees, fight for survival and in some cases close their doors.

Now, however, it appears that the nation’s financial engine is getting a tune-up.

According to a Foxbusiness.com report, many lenders nationwide are opening up their purse strings, therefore leading to more small businesses again feeling comfortable to hire.

The Wall Street Journal notes that between Oct. 1 and Dec. 31, 2010 the Small Business Administration (SBA) signed off on some $9.1 billion in small business loans. In what can be viewed as a correlation, Automatic Data Processing (ADP) reports that employment for small businesses, those recognized as having fewer than 50 workers, increased 84,000 in April 2011 alone. Meantime, employers with less than 500 workers have brought on an average of 188,000 jobs each month this year as of the end of April.

Those numbers are a far cry from the results just prior to this turn around, according to the SBA. The full value of outstanding loans to small businesses fell by $43 billion from June 2009 to June 2010. When you compare that to the previous year period (June 2008 – June 2009), that is a decline of nearly $60 billion.

A Wells Fargo spokesperson told Fox that following two years of a large number of loan rejections, small business owners are requiring the resources needed to move company plans forward. Part of the banking system’s means to further assist small business owners is by making sure as many as possible get a second look when initially rejected for a loan.

As the SBA correctly points out, small businesses are important to both the local and national economy; their viability depends on their means to obtain credit.

Passed last September, the Small Business Jobs Act authorized the formation of a $30 billion fund overseen by the Treasury Department, hereby offering super-inexpensive capital to banks with fewer than $10 billion in assets. The thought is that pushing capital to small financial institutions will in turn deliver money to those who run small businesses.

As a small business owner in 2011, are you hiring once again or are you still banking on better days ahead?


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