Businesses having a harder time getting credit, survey finds

NEW YORK (AP) — Small and mid-sized businesses are having a harder time getting credit and that’s having an impact on their plans to hire.

Those are findings of a quarterly survey of small businesses released Monday by Pepperdine University’s Graziadio School of Business and Management and Dun & Bradstreet Corp. The third-quarter survey questioned 752 small and mid-sized businesses, with some of the results broken out by company size.

Companies of all sizes said it was harder to get loans; 59% said it was difficult to get debt financing, up from 56% in a survey in the second quarter. Businesses had more trouble getting bank loans, a sign that financial institutions may be getting cautious amid an economy that has weakened since the start of the year. Twenty-eight percent of small businesses reported success in getting bank loans during the previous three months, down from 31.6% in the second quarter. Mid-sized companies also had a tougher time, with 75% reporting they could get bank loans, down from nearly 90%.

While banks have increased their lending to small and mid-sized businesses following the Great Recession and the ensuing lean years, lending officers are likely becoming more cautious as signs point to a slowing economy. Small businesses are seen as having the greatest risk for lenders.

Companies expect it to be harder to be approved for loans in the coming months — 56% of those surveyed predicted it will be more difficult versus 52% in the last survey. Still, bank loans are the preferred method of financing companies most expect to get — 68% cited banks as their most likely source of outside money.

Hiring expectations are slightly lower, with 30% of all companies not expecting to add jobs, up from 28% in the second quarter. Access to capital was the No. 1 reason why companies don’t expect to hire; it was cited by 46%. Economic uncertainty was the second-most often cited at 24%, but that was an improvement over 32% in the previous survey.

Banks may be more hesitant to lend because revenue expectations are falling. Small businesses on average expect their revenue to rise 6.9% over the next 12 months, down from a prediction of 7.3% in a second-quarter survey and 7.5% in the first quarter. At the end of 2018, the forecast was for an 8.5% gain.

That increased pessimism wasn’t surprising given that there was a drop in the number of companies reporting they were profitable in the last quarter — 55% of businesses of all sizes, compared to 58% in the previous survey.

_____

Follow Joyce Rosenberg at www.twitter.com/JoyceMRosenberg . Her work can be found here: https://apnews.com

Copyright © 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, written or redistributed.

Related Categories:

Business & Finance

Like WTOP on Facebook and follow @WTOP on Twitter to engage in conversation about this article and others.

Get breaking news and daily headlines delivered to your email inbox by signing up here.

© 2020 WTOP. All Rights Reserved. This website is not intended for users located within the European Economic Area.

More from WTOP

Log in to your WTOP account for notifications and alerts customized for you.

Sign up