The last few years have been difficult for companies as they struggled to survive the recession. Now that the negative financial tide is starting to recede, businesses are seeing positive bank balances, which in turn is encouraging them to expand their operations. Doing so could be difficult without a substantial amount of liquid capital on-hand, a situation that is not necessarily the norm among small businesses. This increases the need for such entities to apply for commercial loans.
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As the economy continues to improve, so do the options small businesses have in terms of lending. For the last few years banks have retracted from risky loans and been very selective about who they choose to give funds to, yet this strategy has harmed them by reducing the amount of income they can obtain. In response, more financial institutions are relaxing commercial loan requirements while those previously unassociated with such offerings start to get in the game.
Recent reports have shown that larger financial entities are increasing their overall loan portfolios by extending more funds to small businesses, The Street reported. The source also explained that these entities are seeing competition from payday lenders and online companies like Amazon, which have opened their own programs with flexible terms that may be more appealing to short-term business borrowers.
"Lenders like Citibank, Sovereign and Citizens Bank are jumping head-first back into small-business lending," said Rohit Arora of Biz2Credit. He said that ongoing improvements in employment were also spurring more lending options, but that small companies were not torn between who to request funds from.
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Over the years, people have been led to believe that certain options were not as safe as others in the realm of commercial loans, but now major banks and credit unions are starting to reduce their requirements and offer products like payday loans, which were once seen as unsound.
The Smart Business Network reported that much of this is in response to slow increases in loan application numbers, and that to attract more clientele and boost financial growth, banks are offering more diverse commercial loan options. As such, companies can now borrow against their credit, but if that isn't good enough due to previous hardships, they may take out funds using their inventory or personal assets as collateral.