Small-business lending has been in trouble, but is there an explanation beyond the widespread perception that banks are denying credit, and starving small entrepreneurs?
Clearly, the financial crisis and recession whacked banks and curtailed lending to small companies. Lending still hasn’t returned to prerecession levels.
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But here’s an alternative view of the principal cause: A range of observers report that, in many cases, small businesses don’t want loans. Their sales are so weak they can’t justify taking on debt to expand operations.
“It’s the sheer lack of expectation that they’re going to grow their company,” says Bernie Kuechler, of Barlow Research Associates, which does market research for the banking industry. “A major driver is that companies are not applying for credit.” Barlow defines small businesses as companies with annual sales between $100,000 and $10 million.
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