The National Federation of Independent Business’s (NFIB) survey of its members has shown an improvement in the satisfaction of small businesses’ need for credit in recent months. In April, the difference between the percent of small business owners who reported that their borrowing needs had been met over the previous three months less the share who reported that their credit needs had not been met hit 20, which is better than the difference of 16 seen last November.
But before anyone gets too excited about this improvement, I want to point out a couple of negatives about the current borrowing situation. First, even though the NFIB small business borrowing needs measure is above the post-2007 nadir of 15 seen last June, it is nowhere near the difference of 35 seen in February of 2007 before the recession and financial crisis hit. So we have a long way to go before we have small business borrowing needs being met the way they once were.
Second, just a couple of weeks ago I pointed out that the NFIB data were suggesting that credit may become tougher for small businesses to get over the next several months. If that happens, small business borrowing needs will be less well satisfied in coming months than they are right now.
Third, and probably most important, we don’t know how much of the satisfaction of small business borrowing needs is coming from weak demand for loans. With sales of many products and services still weak, and relatively few small businesses expanding, many small business owners are asking for smaller loans and lines of credit than they did before the recession. As a result, the decent showing on the satisfaction-of-small-business-borrowing-needs measure might be coming from the weak economy triggering less demand for small business loans, not a greater willingness of creditors to lend.
Your third point is a good one. I think that many businesses have reset their expectations about credit, so they may be reporting that they’re “satisfied” even though they wouldn’t have been satisfied with the same situation a few years ago.
Given that big businesses have experienced record years and banks are back on their feet, ‘tis a puzzlement why credit is not more easily accessible to small businesses, which so many people acknowledge as the engine that drives the economy. I can only hope that the recent efforts by the big guys , to help the little guys, pay off.