Small business owners are increasingly frustrated at being unable to get startup business loans. This article discusses the banking trends responsible for the dramatic decrease in SBA loan financing by the banking industry today. It also points out a new source of SBA loans that is much more accommodating and more eager to lend to small businesses.
Recently the trend for SBA loan financing for small businesses has dropped dramatically. In a recent survey, forty-two percent of small business owners were unable to obtain a loan during the last two years. According to the Institute for Self-Reliance, SBA loans for under $100,000 have decreased over a third since the year 2000. Meanwhile, larger SBA-backed loans are up 36%. One of the big reasons for this worrisome trend is the dramatic decline in the number of community banks.
In the past, community banks and credit unions were the primary source of a small business loan. Unfortunately, the banking industry landscape has drastically changed in the last two decades. In 1984, there were 17,901 small community banks in the United States. As a result of consolidation and the banking crisis of 2008, the number of local community banks declined to under 7,000 last year.
Despite their having only 14% of the total banking assets, small community banks account for nearly half of all of the small business loans generated in the United States. In contrast, the four largest banks in the U.S., that control over 43% of the total banking assets, only generated 16% of small business loans.
In summary, a dramatic decline in the number of community banks has resulted in it becoming increasingly difficult for small business owners to obtain an SBA loan. Unfortunately, the big banks that now dominate the banking industry don’t want to bother with small business lending.
One group of lenders that is increasingly filling this void are non-bank SBA loan providers. A prime example of one of these non-bank lenders is Newtek. Founded in 1994, Newtek has become the largest non-bank SBA lender in the United States. In 2013, the Small Business Administration ranked Newtek as the 6th most active SBA 7(a) lender among all bank and non-bank lenders, by lending volume. In 2013, Newtek funded in excess of $180 million in SBA 7(a) loans. This was a 68% increase from 2012. Barry Sloane, President and Chief Executive Officer of Newtek expects to increase their SBA lending over 40% in 2014.
As a result, if you’ve been turned down by one of the big mega-banks for a small business loan, you should seriously consider submitting an application to a non-bank SBA lender such as Newtek. Newtek is the largest nonbank provider of SBA government-guaranteed loans. In most cases, they can get you prequalified in as little as 48 hours. The application process is easy. Newtek completes all of the SBA application documents for you. Get access to funding for as much as five million or as little as fifty thousand dollars today!
Written by: MarkJ. Krupp, Cofounder of NewBusinessCreator.com