2012: A Good Year for Small Business Finance

Small business lending improved during the past 12 months, which is good news for entrepreneurs and the economy overall. Startups and growing companies create the lion’s share of the new jobs in the private sector, and growth of small firms help make the economy stronger. Several trends emerged in 2012.

SBA Lending

SBA lending volume increased to its second highest level in history. The agency backed $30 billion in loans nationwide. Big banks and smaller, regional banks increased their activity in SBA lending.

Use of Technology in Small Business Lending

Throughout 2012, increasing numbers of entrepreneurs applied for business loans through Biz2Credit and other online platforms specializing in small business finance. Technology eliminates the need to walk into a bank or other lender and fill out paperwork during regular business hours. Entrepreneurs can now apply for funding late at night or on weekends.

Meanwhile, banks and other lenders get pre-qualified leads at no cost, and the whole funding process becomes faster and more efficient. Further, small banks are able to make loans to small businesses outside their local area. Borrowers and lenders both benefit from the use of technology.


“Crowdsourcing” became a fundraising phenomenon during 2012. Young, tech-savvy entrepreneurs used this form of capital raising from friends and acquaintances through social media. It proved effective for artists, filmmakers and other creative types, non-profits, and startup businesses requiring smaller sums of money. However, companies looking for more than $50,000 likely should go a more traditional route for the funding they need.

The Rise of Alternative Lenders

Although large banks increased the percentage of small business loans they approved this year, they still typically grant less than one out of five applications on average. Credit unions were a reliable source of small business funding during the first half of the year before slowing down. Meanwhile, merchant cash advance companies, accounts receivable financers, factors, and micro lenders all have increased their lending significantly. They offer flexible, increasingly affordable terms, and most importantly, quick decision-making.

During the Presidential Election, Democrats and Republicans repeatedly focused on small business growth. As President Obama begins his second term, small business owners are examining the impact of Obamacare regulations and the potential of tax increases for people who earn greater than $250,000 annually.

Additionally, the “Fiscal Cliff” has caused uncertainty in the credit markets.

Despite these concerns, there are numerous signs that the economy is improving, and lenders appear increasingly willing to provide capital to small businesses in 2013.

Diagram on financial report Photo via Shutterstock

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Rohit Arora Rohit Arora, CEO and Co-founder of Biz2Credit, is one of the country's leading experts in small business finance. Since its founding in 2007, Biz2Credit has arranged $800M in small business loans and has helped thousands of entrepreneurs. Rohit was named Crain's NY Business "Entrepreneur of the Year 2011."

3 Reactions
  1. Great post, Rohit. Crowdsourcng is extremely effective and can be used for a variety of things other than raising capital. Thanks for sharing your insights.


  2. Thank you for mentioning what, in my opinion was a huge small business trend in 2012: The Rise of Alternative Lenders. I work for an invoice financing company called The Receivables Exchange(Rohit, I believe you know our company well) that specializes in alternative lending to small business owners. As the banks continued to back away from the small business owner in 2012, alternative lenders stepped up to provide much needed working capital. Almost all of the latest polls and studies seem to indicate that the bank lending trend will continue well into 2013 – a trend I believe could provide a huge opportunity for alternative lenders to meet small business needs. Healthy competition in the industry is constantly lowering interest rates and fees and increasing flexibility – all good news for the small business owner.

  3. Technological advances have really improved how small businesses manage their financial information. For instance, hosting your bookkeeping in the cloud helps keep all of your files in tact and reduces the need to email files back and forth between departments and your bookkeeper. Because you can access these files anywhere that has an internet connection you can get the files you need anytime, anywhere to keep your business moving smoothly.