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Loans not a priority for small businesses

Posted by Jason Keith  September 4, 2011 07:39 PM

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Have you heard that small businesses will lead the country out of the current downturn in the economy? It’s a common theme, one that has been echoed by leaders in the government and beyond. The reason is that the statistics don’t lie: According to the US Small Business Administration, small businesses:

·        Represent 99.7 percent of all employer firms.

·        Employ just over half of all private sector employees.

·        Have generated 64 percent of net new jobs over the past 15 years.

·        Hire 40 percent of high tech workers (such as scientists, engineers, and computer programmers).

·        Are 52 percent home-based and 2 percent franchises.

Entrepreneurs are the engine that drives economic growth in the United States.  When the economy is facing difficult times one of the biggest problems for a small business owner, at least according to the experts, is a lack of credit.  Small business owners can’t get a loan, which means they can’t pay their bills, which means they have to shut their doors.  Jobs are lost, and the economy continues to suffer.   Getting more money freed up to lend to entrepreneurs has been a focus for the government and continues to get traction as a media narrative.

It might well be true that small business financing is an issue to some degree, but is it also true that the demand for those loans are as high as we would expect given the amount of press this topic has gotten?  According to some recently released statistics, the opposite might be true. 

To start, the National Federation of Independent Businesses recently released a report that looked at small business credit and financing.  In it the NFIB asked the nation's small businesses, defined as 250 employees or less, to name the "most important finance problem facing your business today." Poor sales and unpredictable business conditions far outweighed finance problems, with just 14% citing credit as the number one problem. 

The U.S. Chamber of Commerce polled small-business executives on the "main challenge facing small business owners," and just 3% of the respondents said "lack of credit."  And as the businesses get smaller, so apparently does the demand for loans.  According to recent numbers from Vistaprint, micro businesses (businesses with between 1-10 employees) do not have a need for financing, with over 85% saying they have not attempted to secure loans in the past 12 months. 

Anecdotally, small business owners say they are struggling to find paying customers, which at its heart is what a struggling economy will do for any business.  While access to credit will always remain an important factor, it appears that small businesses are doing what they can to stay within the limits of the credit they already have.  They are instead focusing on what matters most: customers.

Over a long enough timeline, if they don’t have customers, they won’t survive, no matter how much credit is available to them.  So at the end of the day, small business loan availability may be a moot point.  Local businesses need us to help support them, rather than lend them money.  That’s why campaigns like “Small Business Saturday” and other local events to boost local business spending are so important.  Without them, awareness wanes and money goes elsewhere. 

Have you had to secure financing for your small business this year? Did you have difficulty? Or have you decided not to seek more credit but instead focus on driving more customers and revenue? 

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About this blog

Jason Keith has been working for and with small businesses in the New England area for more than 10 years, specifically small, micro businesses. Born and raised in Massachusetts and a former journalist, he provides a unique perspective on the issues facing small businesses locally and nationally.To reach him directly email jasonpkeith@gmail.com.

This is a personal blog. The opinions expressed here are the author's alone.

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