In the latest research of small business lending trends, researchers have found evidence to be optimistic. Across the U.S. and U.K., it appears access to bank loans is easing, with most SMBs able to obtain a bank loan. Yet across Europe, a massive SMB funding gap remains, analysts warn.
The research also offers a glimpse into the struggle for alternative lending players to prove their worth as an important source of financing for small businesses that can’t access a bank loan. The vast majority of funding stems from traditional banks and FIs, research reveals, but some analysts say Alt-Fin’s market share will surpass 9 percent in the next few years. Explore more details on that statistic, along with other key data points in the SMB funding space, below.
$823.6 million: the value of the small business funding gap across Europe, according to Code Investing. The company published new data this week analyzing small firms’ struggle to get bank loans. On average, borrowers must wait 144 days for the loan to be approved. While alternative finance accounts for only 2 percent of the small business lending market in the U.K., Code Investing CEO Ayan Mitra expects the SMB funding gap to further promote reliance on alternative lending for small business borrowers. Code Investing predicts the market to secure 9.1 percent of the SMB funding market by 2021, according to reports in SME.
80 percent of small business loan applications were approved in the U.K. in Q2, new data from U.K. Finance concluded. New loans during the quarter totaled $9.28 billion worth of small business finance, issued across 69,300 loans. While the data suggests a positive environment for small firms to access traditional finance, reports in Bridging and Commercial noted that the figure is significantly higher than the value of alternative loans that small businesses have obtained as a result of the bank referral scheme. That project, launched two years ago, has yielded just $20 million for small business borrowers. Industry experts told the publication that demand for financing remains strong amid market uncertainties related to Brexit and other geopolitical factors.
53 percent of U.S. small businesses successfully secured bank loans in Q3, research from Dun & Bradstreet and Pepperdine Graziadio Business School said this week. Their Q3 2018 Private Capital Access Index revealed U.S. entrepreneurs are in a favorable funding market, with 85 percent of middle-market companies with revenues between $5 million and $100 million approved for bank loans during the quarter. Small businesses with less than $5 million in revenues saw the most dramatic year-over-year increase in loan acceptance, rising from 32.7 percent acceptance in Q3 2017 to 43.8 percent this year. Traditional bank loans were cited by entrepreneurs as their top source of funding, followed by credit union loans and asset-based lending.
Two-thirds of SMBs that apply for a bank loan receive the full amount they initially sought, new data from the U.S. Chamber of Commerce and MetLife revealed. They recently released their Small Business Index, which reached its highest level for Q3 2018 in the history of the report. Fifteen percent of small businesses surveyed said they were rejected for bank loans, while 11 percent said they received part of what they had applied for, the research revealed. In a statement, U.S. Chamber of Commerce Vice President of Small Business Policy Thomas Sullivan said that while the bank lending industry is “moving in the right direction,” policymakers still have work ahead of them to continue to promote small businesses’ access to capital.
One-third of small firms are not driven by profit, according to a new report by peak b. Analysts said a survey of U.K. small business owners suggests that entrepreneurs are driven more by social responsibility, with nearly half having hired an individual simply to give them an opportunity, even if that new hire wasn’t necessary for the company. More than one-third noted that they have kept a member of their staff on board even when they didn’t need them anymore. Ninety percent of the more than 1,000 SMBs surveyed said they play a role to support their communities. According to Michelle Ovens, founder of peak b, the research exemplifies the importance of supporting SMBs that support their communities despite cash flow and staffing challenges.
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