December 22, 2014

Small Business Credit Remains Tough to Get

The last quarter saw a dip from 34 to 33 percent in the share of small business owners reporting that credit is difficult to get, according to the most recent Wells Fargo Small Business Survey.

Statistically, however, the share of small business owners reporting trouble obtaining credit has been the same since the third quarter of 2009. The survey, which is based on a nationally representative sample of 600 small business owners whose companies have up to $20 million in annual sales, has a margin of error of plus or minus 4 percentage points.

In the figure below, I have plotted the fraction of small business owners reporting that credit was difficult to obtain for each quarter since April 2007. The figure clearly shows three distinct periods in small business owners’ perceptions of credit availability: Before the recession, when only a small fraction thought credit was difficult to obtain; during the recession, when the share expressing this view was rising; and during the recovery, when a large fraction has thought that credit was tough to get.

In a nutshell, the Wells Fargo surveys indicate that we are in a period of tighter small business credit than before the Great Recession.

Source: Created from data from the Wells Fargo Small Business Survey

4 Comments ▼

Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

4 Reactions

  1. Banks are being very tight on who they will loan to, and with the ease of bankruptcy I can see why they are being cautious. Not to mention all the foreclosures and walk-aways they’re still dealing with from the housing market crash.

  2. Ah, but for the good ole days of 2007 and 2008…. :)

  3. AS A MOM AND POP BUSSINESS, NOT A CORP OR ETC. IT IS UNFAIR THAT THE 4 UNIT APARTMENT VS MY 5 UNIT BUILDING, FINANCING TERMS ARE SO DIFFERENT.

    IT IS TIME TO CHANGE THE CUT OFF AND LENDING TERMS THAT HURT THE ‘MIDDLE CLASS, SMALL INVESTOR’. I FEEL SQUEEZED.

    MY COUNTER PARTS WITH 4 AND BELOW HAVE A MUCH EASIER AND WIDER RANGE OF LENDING OPTIONS AND EVERY MONTH IT SEEMS TO GET ONLY BETTER FOR THEM.

    BANKS THAT ADVERTISE OR BOAST LENDING FOR 5+, HAVE LOW LIMIT CAPS, SHORTER TERMS HIGHER FEES ETC. THAT DO NOT MAKE SENCE EVEN TO THE RANK AND FILE AT THE BANK (OFF THE RECORD OF COURSE). BEFORE I CAN RESUME
    GIVING OUT THE 1099’S AND PAYING ALL THAT THAT IMPLIES, I NEED A LINE OF CREDIT OR REFI THAT HELPS ME NOT THE LENDERS PR.

    WE NEED SOME ONE TO JUST LOOK AT THE SITUATION AND ADJUST OR FIX IT, BE IT CONNIE ~ FREEDIE ~ DUBAI OR ANY INTERNATIONAL LENDER.

  4. I work with many small business in acquiring loans and I also investing in duplexes in 3 different states. It is true that lower unit properties have much more flexibility with lending and this is because the risk is reduced. The more people you are depending on to pay your mortgage or loan, the higher the risk for vacancies and so on. This is not meant to be a blanket statement that accounts for all scenarios, but this is one reason the bank treats the lending for property like this. I have seen banks get tight in 2009 and they got a little easier to deal with in 2011.

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