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Small Businesses…What is your credit worth?
According to a recent article on CNNMoney.com, small businesses are having an even harder time borrowing money than they were a year ago just before stimulus funds flooded the coffers of the nation’s largest banks.
The U.S. Treasury released a report this month showing that these banks shrunk their collective small business lending balance by $1 billion in November alone – a figure that sits on top of the $12.5 billion already cut since April.
While small businesses across the country have faced tighter lending practices for a couple years now, this continued drop comes at a time that many Wall Street darlings are beginning to recover. Before the recession, 26 million small businesses nationwide were drawing $718 billion in loans each year. Between April and November 2009, that number fell to $256.8 billion.
So what does this mean for your small or even mid-sized company? Well, for one, there is hope in the fact that bank CEOs are getting pressure from Washington to ease their lending restrictions for companies with good credit. Still, many companies are taking this opportunity to focus on the goals that are within their reach, rather than take on more debt. Also, additional lending programs are in the works from the Small Business Administration, however experts say that the money available through these efforts won’t be able to make up for the funds that the big banks have taken off the table.
It appears that the credit situation will remain a significant obstacle throughout 2010. Knowing that now can help you be prepared for the year ahead. So remember, if you have any questions about your company’s financial situation, we’re always here to help.
Also, while many of us tend to keep banking affairs to ourselves, if you’ve had any experiences over the last few years that you think would be valuable to others, please feel free to continue the conversation in the comments below.