Good news on small-business loans: Entrepreneurs are demanding more capital — and getting more of it — than they have in the last three years, according to a new survey. The news is evidence of a stronger economy and an expanding market for small-business financing.
Both demand and access to small-business financing have hit their highest rate since the fourth quarter of 2012, according to a quarterly survey by Pepperdine University’s Graziadio School of Business and Management and Dun & Bradstreet, a business research firm.
The demand for capital by small businesses with less than $5 million in annual sales climbed 9% sequentially in the second quarter of 2015, the survey said.
Access to capital, which edged higher by 1% from the first quarter, has risen by 8% since the survey began in 2012.
“Particularly in small business, we’re seeing a really good trend,” Craig Everett, director of Pepperdine’s Private Capital Markets Project, tells NerdWallet.
“Access has definitely improved, and demand in the last quarter had a really good uptick for small-business financing.”
Awareness of alternative lenders
That demand has coincided with the emergence of new forms of small-business financing, including those offered by alternative lenders.
These lenders offer entrepreneurs quicker access to small-business loans, although they’ve been criticized for charging high interest rates.
“My guess is the awareness of these programs has been increasing,” Everett says. “Access to capital has increased and some of it is due to alternative programs.”
Small-business “optimism and demand is a promising sign that economic recovery is in full swing,” Jeff Stibel, Dun & Bradstreet’s vice chairman, said in a statement.
Demand among midsize firms
That optimism was underscored by another key finding in the survey: More than a third of small-business owners, or 33%, said they planned to seek financing in the next six months, up 2% from the second quarter of 2012.
Although small businesses are seeing better times, demand for capital among midsize firms — those with annual revenue of $5 million to $100 million — has been flat, Everett says.
“That’s troubling,” he says. “There are some green shoots in small businesses, but medium-sized businesses have been stagnant.”
Benjamin Pimentel is a staff writer at NerdWallet, a personal finance website. Email: firstname.lastname@example.org. Twitter: @benpimentel
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