Credit Borrowings By US SMBs Fall

Posted on September 9, 2010 by

According to a report on “Small Businesses Credit In A Deep Recession” by NFIB, the immediate concern for 51% (up by 6% from the last year) of small businesses is slow or declining sales, 22% reported uncertainty, 8% said access to credit and 8% said falling of real estate values. These figures remain same as the last year.

The percentage of small business owners having a business loan or credit line fell by 20 percent during the last year. But the outstanding number of loans and lines per owner with at least one loan or line, remained constant. The percentage of businesses holding a credit card(s) fell by about 10 percent. Sixty-two percent were found to pay off their card balances monthly, remaining 38 percent use business cards as a source of credit.
55 percent of small employers were involved in borrowing in 2009; 45 percent did not borrow. Of the people who did not borrow, five percent of owners, did not even try, as they did not think they could obtain credit.

Forty (40) percent of small business owners who attempted to borrow in 2009 said that their all credit needs were met; 10 percent said that most of their needs met; for 21 percent only some of their needs were met; and, for 23 percent none of their credit needs met. The current level of borrowing success is found to be significantly lower than in the mid-2000s which was 90%.

In 2009, about 20 percent of small employers tried to obtain the following types of credit: vendor loans, business loans, renewal of credit lines, credit lines and business credit cards. Among them, credit card (73% successful) was easy to obtain; while the most difficult one was a new line of credit (38% successful).

Falling real estate values had limited small business owner capacity to borrow and straining the currently outstanding credit relationships. Ninety-five percent of small employers own a primary residence, commercial business premises, or other investment in real estate (that is neither of the two). Twenty percent hold one or more real estate mortgages which finance other business assets and 11 percent use real estate for business purposes. 20 percent hold a second mortgage on a property. Thirteen percent report of at least one property being upside down.

The major reason why small businesses have not yet started to recover, is because of deep and broad real estate ownership.

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