At the start of 2008, obtaining or extending a line of credit with a bank, or even getting a small business loan, was a painful process. But through planning and determination, small businesses have adapted over the past four years to become more profitable, and in banking terms, lower risk loan profiles. According to the Thomson Reuters’ PayNet Small Business Lending Index, “Lending jumped by 18 percent between November 2010 and November 2011, a figure that puts small business financing at its highest level since February 2008, when the downturn started.” Furthermore, separate reports have shown that bankruptcy filings are down, as are the number of people applying for unemployment benefits, additional signs of economic recovery, reports American Express OPEN Forum.
Retail Banking Relationships Improving
While banks were once reluctant to lend, according to the Reuters’ survey, “More small business owners are on top of their debts, and the number of loans in “moderate delinquency” (behind 30 days or more) and “severe delinquency” (behind 90 days or more) both declined in November.” Bankruptcy filings also decreased nationwide, with new case filings down by 12 percent, according to the American Bankruptcy Institute.
Small businesses, such as independent retailers, have strived to be responsive, truthful, timely, reasonable, available and cooperative, in order to increase their profitability and improve their banking relationships. “We are now in this new phase of growth and low risk,” says William Phelan, president of Skokie, which provides risk management tools. “We’ve seen delinquencies improve consistently to levels that are now below risk from 2005, so that lends confidence in my mind that we’ve got these millions of companies in the United States that now have financial capacity that didn’t exist three years ago.”