Might banks be making inroads into the hearts and minds of smaller firms as they seek out capital – as some SMBs cite at least some dissatisfaction with non-banking lending conduits?
The recent 2018 Small Business Credit Survey from the Federal Reserve Bank of New York noted that, compared to 2017 figures, more than 6,600 small businesses had increased capital demands last year – and found a bit more satisfaction with traditional lending partners.
The Fed data, through collaboration with 12 Fed banks, found that 43 percent of surveyed companies surveyed said they had applied for financing in the last 12 months (up from 40 percent in 2017), and of those, nearly half (47 percent) received the full value of what they sought. Drilling down a bit further, about one third sought financing from online lenders in 2018, up from 24 percent in 2017.
In terms of the actual lending, 57 percent of SMB respondents to the Fed queries said they sought $100,000 or less from lenders, and 19 percent sought between $100,000 and $250,000.
Beyond those headline numbers – and the aforementioned market share that online lenders grabbed in offering up loans, lines of credit and other debt – the data also showed that fewer of these smaller loan applicants said they were dissatisfied with the wait times and application processes seen at banks. The percentage of applicants who said they were dissatisfied by a long wait for a decision and funding from larger firms with at least $10 billion under management slipped to 26 percent in the latest reading, from 33 percent in 2017. The tally was also down at smaller banks, at 20 percent in 2018, which compares favorably to the 25 percent in 2017. Yet the same dissatisfaction parameters actually grew at non-bank online lenders to 12 percent in 2018, up two percentage points from 2017.
Looking at the application process, 23 percent of applicants said it was difficult at larger banks, down from 28 percent in 2017. Roughly 15 percent of SMBs said smaller banks had difficult application processes in place compared to 24 percent previously – and for non-bank online lenders, the tally jumped year on year to 15 percent, from 10 percent in 2017.
Interest rates were cited as a source of dissatisfaction for 19 percent of applicants to large banks, down a percentage point