The demand for loans seems to remain unabated for small businesses in New York. But they are not being met with the same enthusiasm as is the demand. Only half of the 59 percent of loan applicants in the first quarter of 2010 got approvals for loan grants and the rest could not fulfill their demands.
On surveying 426 small businesses in New York and neighbors, the online poll has identified some crucial points and reasons why there is a drop of outstanding loans to small businesses by $45 billion, that equals to 6 percent, since 2008.
It is not fall of demand from borrowers that led to the contraction according to the New York Fed survey. Other business conditions also had a role to play. Sales fell from 2008. Companies that showed sales growth during recession were either able to utilize their profits properly to fund their businesses or were reinvested their profits.
The unstable condition of a business did not affect their credit-asking rate though it did had an effect on the loans granted. It is found that business owners with stagnating or declining sales did ask for almost the same credit as in boom years. The greatest approvals of credit were seen for vehicles and equipment (63 percent) and personal credit cards (46 percent). The least approvals were seen for business loans (20 percent) and business credit lines (27 percent). Companies that got credit in 2008 were declined approvals.
The survey conducted by New York Fed does contradict the findings of other surveys including the one conducted by National Federation of Independent Business (NFIB). Business are reluctant to borrow is the finding of NFIB.
Similar surveys are stated to be carried out in future too by institutions like Federal Reserve Banks that includes Boston and Cleveland, New York Fed and others.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to