New Research Brief - Small Business Credit: It's a Crunch, Not a Crisis

Our latest Intuit Future of Small Business research brief explores the outlook for small business credit with an emphasis on the role small and mid-sized financial institutions are playing.

Interviews conducted this spring with small business owners and financial services executives suggested that while large financial institutions have cut their small business credit and lending activities, small and mid-sized financial institutions were still active in the small business credit markets. 

To explore this further Emergent Research and Intuit's financial services division, Digital Insight, brought together about 2 dozen leaders from small and mid-sized financial institutions for a series of round tables covering small business credit. 

The key findings from the research are:

1. Community banks and credit unions can be an excellent and accessible source of credit for small businesses who meet their lending criteria. They want the business and are ready to lend. But small banks and credit unions are conservative lenders and credit standards are high. 

2. Businesses that can demonstrate the ability to manage assets and cash flow will find credit is still available, although not unlimited.

3. Credit availability will remain tight. Even though community banks and credit unions are looking to expand small business lending, they simply don't have the asset base to replace the large lenders.

4. The reality is that the smallest of small businesses - those with five employees or less - often will not qualify for business credit. They'll need to rely more heavily on relationships with their bankers or seek other sources of funds. 

For more than a decade the U.S. economy has been driven by a wave of debt.  Consumers and businesses both benefited from easy access to cheap credit.  But the recession has changed this.  The next decade will see a de-leveraging of the U.S. and  global economy. 

Credit will continue to be hard to come by as lending institutions revert to traditional, more stringent lending standards.  Small businesses will need to adjust their credit appetite and expectations to this new reality.   

Comments

[David Criswell]

These are good insights and we see and hear similar trends from our customers. We also see business owners taking action to improve their chances at financing.

Yes, credit standards are tightening, however, with credit at the core of access to capital we see business owners educating themselves on their personal and business credit scores and managing it proactively.

[ultrayellowpages]

One of the things I find most amazing about the Credit Crunch is how surprised most commentators, who ought to know better, are at how things are turning out.

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