Market Overview

Access To Capital Keeps Small Business Optimism Buoyant

Access To Capital Keeps Small Business Optimism Buoyant

Throughout the past year, the fear of an incoming recession has impacted commodity markets, stock traders and even the members of the Fed. However, one key contingent that has yet to be rattled by the prospect of a contracting economy is the nation’s small businesses.

The latest entry in the National Federation of Independent Business’ monthly Small Business Optimism Index shows the multi-year trend of high business confidence continuing, with respondents in the July edition of the survey expressing an increased desire to expand operations across a variety of areas compared to June’s report. In fact, July’s survey constitutes the 32nd consecutive month that the index posted a reading above 100. Prior to the current streak, the index had only peaked above 100 once since 2006.

According to the report, there were multiple factors driving this persistent faith among small businesses, ranging from improved sales and revenue numbers over the second quarter to a general expectation that the economy was likely to just keep getting better.

However, one standout statistic included in this and many of the preceding surveys is the ease with which businesses are able to access capital. Just 3 percent of respondents through the June and July surveys reported they had unmet borrowing needs, and only 2 percent said their most recent loan was more difficult to acquire than the previous one. Historically, those figures average around 5-6%, sometimes reaching as high as 10% of the business owners surveyed.

According to small business fintech lender Credibly, this dramatic upward trend in borrowing has been a constant for the company since its beginning in 2010.

“Since 2010, we have grown at a rate of 30%+ and we expect that trend to continue,” said Founder and Co-CEO of Credibly, Ryan Rosett. “Over the last few years, we have seen a large increase in the number of applicants who come to us first as their preferred method of financing.”

For their part, traditional financial institutions like banks and credit unions have kept lending standards relatively lax, contributing to the high degree of access to large-scale loans of more than $100,000. In fact, the state of borrowing is so business-friendly that the NFIB survey report spells out the fact that “Credit conditions are about as supportive as they have ever been in the 46-year survey history.”

But diversity in the kinds of loans available to small businesses is likely another critical factor contributing to the availability of capital. Thanks to greater sophistication in risk assessment and underwriting technology, a greater array of small business owners are able to secure smaller, targeted loans from non-traditional sources to cover seasonal expenses or gradually ratchet up operations.

“We understand small- and medium-sized businesses and we take pride in supporting this historically underserved segment,” said Jeffrey Bumbales, Director of Marketing and Strategic Partnerships at Credibly. “We are constantly refining our models and product suite so that we can better satisfy the financing needs of SMBs, while servicing an even wider array of applicants.”

Although Wall Street might end up gripping the edge of its seat for the remainder of 2019 waiting for the other shoe to drop, businesses on Main Street remain buoyant about the next few months. Given the amount of capital on offer from all sides and a resilient consumer, it’s hard not to see why.

Credibly is a content partner of Benzinga.


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