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Small Business Lending In January Falls To Below November Levels

Written by Ken Gaebler
Published: 3/1/2011

Research finds that small business lending declined slightly in January.

For much of 2010 small business news experts pointed to a lack of available credit as the nexus of this sector's continuing problems. However, a recent report is suggesting that the real difficulty may in fact be a lack of demand.

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According to the Thomson Reuters/PayNet Small Business Lending Index, borrowing for small businesses may not return to pre-recession levels for at least another year or two, as seasonally adjusted rates fell from December to just below November's level.

William Phelan, PayNet's president and founder, revealed that low demand and the slow rate of recovery could be explained by what small businesses are borrowing to finance. Rather than borrowing to fund expansion plans, entrepreneurs are taking out loans to mainly replace old equipment.

"Small businesses are not coming out of the gate aggressively in 2011," Phelan told Reuters. "We are calling it the long-haul recovery."

However, last week, Treasury Secretary Timothy Geithner said that the U.S. financial system is currently in a much stronger position than it was before the economic crisis.

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