The problem over small businesses and their access to credit seems to be ongoing despite the fact that recent legislation has allowed for the SBA to guarantee a higher percentage of certain small business loans. While, traditionally, SBA loans were beneficial to homeowners and covered a percentage of loans which were made by various financial institutions, many banks have been reportedly tight with their lending practices and unwilling to make SBA loans where this higher guarantee was not available.
Understandably, banks are concerned about the ability of certain small businesses to repay debts, but there are arguments against these tight lending practices as many small businesses who are seeking access to credit are unable to assist the economy by adding jobs which are desperately needed.
A CNNMoney report indicates that there are still concerns over the lack of access to credit small businesses have, but financial institutions are quick to state that business owners are simply not borrowing. While there are reports that show some companies feel they will be denied a small business loan, thus they are not attempting to gain access to capital, but there are also indications that more businesses may be looking for access to credit in the hopes of growing their company.
Some banks have said that businesses are simply not in a position to borrow or repay small business loans, and there is also the argument that access to small business capital will not necessarily help with the unemployment problem. Arguments in this area state that small businesses will be unlikely to hire new workers if they have recently acquired debt, but many counter that argument with the fact that companies who cannot gain access to small business credit cannot grow.
While, again, recent legislation has allowed for certain small business lending opportunities, like those from SBA loans, accusations that banks are still not providing lending opportunities remain in many areas across the nation. Yet, according to banks, they are making small business loans and access to capital available, but business owners have been hesitant to borrow.