I’m sure I’m not telling you anything you don’t know when I say times have been – and continue to be – tight for small businesses. But, as we emerge from the recent credit meltdown – and credit for business begins to loosen – we are finding that not all “small” businesses are benefiting from the easing in the credit markets.
A recent Wall Street Journal (WSJ) article points out that banks are lending again, and the volume of deals in the small-business credit market reflect that trend. But, the article also mentions that things are very uneven. In fact, many companies are being shut out because they are too small or in the wrong industry. The WSJ writes that “much of the money is going to the ‘big’ small businesses.” The article suggests that “small” is a relative term, and that companies with less than $1 million in annual revenue aren’t sharing in the renewed growth in credit for business.
Funding small business: What’s too small?
I know we talk about billionaires and trillion-dollar deficits. But, I wouldn’t count myself among the bankers, bureaucrats and politicians who think of $1 million as being small.
Yet, the banks seem to consider companies under that threshold to be too small. In addition to size, the article goes on to say that industry and other considerations have further tightened the window for funding small business. “Size wasn’t the only deterrent,” the article continues. “When we pressed them [5 banks] for a reason, their only excuse was, ‘We’re not lending to the restaurant industry.’”
Watch for part two about the continued crunch in small business funding.