Hopes And Small Business Loans Rise

One of the hallmarks of the recent recession has been the increased difficulty for small businesses to obtain commercial loans. The recovery has floundered because small business are considered the driving force behind lowering unemployment numbers but those businesses have found it nearly impossible to expand due to tightening credit. Moreover, many with the means to acquire commercial loans have been reluctant to take on new debt. Recent data suggests that banks as well as small businesses may be feeling more optimistic.
Information gathered by research firm, PayNet shows a 12 percent increase in small business lending in May as compared to April. This was the largest increase since the summer of 2009. If this continues it will demonstrate both the willingness of banks to issue loans to small businesses and the confidence those businesses have in the economy as a whole. Although business needs capital, often borrowed, to expand they must also be willing to take a risk. Until recently, both banks and businesses have preferred to play it safe.
Investment in new equipment and increases in hiring could result from the increase in those loans, or it could be simply a fluke or an anomaly. PayNet, which regularly tracks loans to small businesses, warns that as good as this news appears this break in the four-month decline of such loans should elicit only cautious optimism.
According to the president of PayNet, William Phelan, “We expect to see steady and cautious expansion by small businesses if we avoid external shocks such as another credit crisis.”
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