Wells Fargo, a leading financial lender, projects that it will have loaned $100 billion to small businesses by 2018. Small business loan approval rates have increased since the economic downturn and have risen from 18.8 percent in March to 19.4 percent in May.
In addition to traditional lenders small businesses have many more options when seeking financial assistance due to recent economic trends. There are now many more types of options to obtain working capital and loans.
Here is a summation of the six recent trends in small business loans.
First, it is easier to obtain a loan due to the Small Business Administration. The SBA is not lending money itself, rather it is guaranteeing a portion of small business loans which in turn makes lending easier for financial institutions. Of course there are still many qualifications a business must pass but there are many programs such as the 7(a) Guaranty Loan Program, SBA Express Program, and the Micro Loan Program to help the process.
Second, a huge trend is the increase in alternative lenders in the small business loan marketplace. Due to the complex nature of obtaining a loan from banks and credit unions alternative lenders such as 1st American Merchant have become popular especially due to low interest rates.
Third, perhaps in part due to the alternative lenders increase, traditional lenders are improving how they work with small businesses. Just as Wells Fargo pledged to lend a massive amount to small businesses, other lenders will likely do the same as they gauge the impact of small businesses on local economies.
Fourth, there has been an increase in loan size for middle-market SBA loans. Now it is easier for medium sized businesses to get loans of up to $5 million for the 7(a) loan program. Now middle market businesses can benefit from this loan program.
Fifth, lending has gone mobile. Due to the ease of access to working capital alternative lenders have begun to provide working capital on the go. There are several smartphone apps and mobile sites that allow borrowers to manage their accounts and loans remotely.
Lastly, cash flow determines your business. When lenders consider a business for a loan they take the FICO score and cash flow into consideration. Keeping a positive cash flow would be a big help in regard to financing a business.
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