It is not common to find businesses taking out payday loans or seeking cash advances. A restricted lending environment has led companies to consider dire measures like these just to make ends meet. However, a survey conducted by Pepperdine University researchers indicates that the tide may be turning.
Lenders seem to be approving more business loans than in the previous year.
Things have not changed drastically because most requests for business loans are still rejected. However, the rejection percentage is now 60, compared to the 67 percent figure based on Pepperdine surveys of six months and one year ago.
Rejections are mainly due to concerns regarding the collateral, cash flow, or earnings of borrowers.
Of the banks responding to the March 2011 survey, three quarters said they faced more regulator pressure to avoid issuing bad loans. Sixty-one percent of these said this pressure led them to deny loans they would normally have approved.
No time period was provided regarding when these actions took place. This was the first time Pepperdine asked this interesting question on its survey.
An increase in loan demand was also revealed by the survey. According to 53 percent of the banks surveyed, more businesses are looking for funding than was the case just six months ago. Though it may be difficult to draw firm conclusions based on this, one possibility comes to light.
If banks are witnessing increased demand for loans and are approving more loan applications, business credit should eventually expand.
Federal data suggests another story, illustrating that the total value of outstanding business loans is decreasing, when loans less than $1 million are the topic of consideration. It remains to be seen whether this will change in the future.
Businesses everywhere hope it does because short-term financing like cash advances just will not cut it.
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