Dinn, Hochman & Potter, LLC

Small business loans slowing while economy recovers

As many Ohio business owners might know, bank loans may be available to them, but the number of small businesses that seek loans has dropped. This may reflect a less-than-hopeful opinion of the market, or it may indicate a level of prudence amongst small business owners.

According to a representative of a large banking lender, the economy's rebound means that banks have more money to lend and that rates for lenders are still low. Bank representatives say that they want to lend start-up money or money to enhance existing businesses. Borrowers can search for loans at the best rates for their needs.

Out of nearly 300 small-business firms surveyed by a financial information company, 77 percent of the business owners said that they had never asked for a loan. Other reasons given for not applying for loans vary, but the majority of respondents said that they did not want additional debt. This may be a healthy attitude since additional debt puts a strain on companies.

Other reasons that small-business owners are shying away from loans, according to the survey, are that they feel that they may not be approved, or they perceived the rates to be too high. More than 50 percent of business owners relied on their savings to start their business with a small percentage citing loans from family or friends. In addition, many businesses have little need for startup funds due to the low cost of starting online.

Business organization depends on many factors, including knowing how and when to enhance a business base. An attorney with experience in business law could address whether or not a business owner should take on new debt. A business law attorney can analyze a client's financial position and help determine whether its capital structure could benefit from taking on debt at a favorable interest rate.

Source: Entrepreneur, "Despite Access to Credit, Many Business Owners Are Reluctant to Take on Debt", Laura Entis, July 24, 2014

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