In recent months, small business owners may have found it a little more difficult to obtain funding as they attempted to expand their operations, but that trend reversed itself considerably in April.
The latest Thomson Reuters/PayNet Small Business Lending Index rose to a rating of 110.5 from just 99 in March, according to a report from Reuters. It's likely that this significant increase will in turn increase hiring, as most small business loans are used to buy things vital to expansion, including tools, equipment and even new facilities, which in turn usually require more workers to operate successfully. The increase in the lending index came to 17 percent on an annual basis, but nonetheless, the current level is still down from the 112.8 observed at the start of the year, as a result of continual declines observed in the first few months of 2013.
In general, it's believed that the uptick in lending came as a result of the Federal Reserve Board's ongoing efforts to buy some $85 billion in bonds and securities every month as a means of artificially depressing interest rates and increasing interest among businesses in obtaining this type of financing, the report said. However, there has clearly been little traction for small business lending to this point. There is, however, reason for some amount of optimism in this regard.
"[Small business owners] are not heading for the exits, but they are not firing up yet either," PayNet president Bill Phelan told the news agency. "There's a lot of money being pumped in, but these businesses aren't biting."
This may be the result of small business owners feeling better about their finances overall, but not so good that they believe they're in a position to expand, the report said. The rate of delinquency on small business loans slipped by one basis point in April to 1.56 percent of all outstanding balances, which was down considerably from the all-time high observed in August 2009, when payments between 31 and 180 days late came in at 4.73 percent of small business loans. The current level is an all-time record low.
SBA trying to get veterans involved
Meanwhile, as part of further attempts to increase the amount of small business owners across the country, the U.S. Small Business Administration is now working with a number of major lenders as well as smaller community institutions to give more former military members the resources to start their own companies, according to a report from the agency. In all, it's believed some 2,000 veterans will be able to obtain financing to either create or grow their independent companies with an additional $475 million in funds over the next five years.
"Through this partnership with national lending partners and regional and community lenders across the U.S., we stand ready to serve veteran entrepreneurs with loan-guarantees, entrepreneurial training, and resources that are critical tools to help them start businesses, drive the local economy and create jobs for themselves and their communities," said SBA administrator Karen Mills.
Nationwide, there are already more than 2.45 million small businesses owned by veterans, and these companies employ more than 5 million people, the report said. Veterans working in the private sector are statistically more likely to be self-employed than those with no military experience.
These owners who are looking to expand, regardless of their military backgrounds, may want to consider the potentially hidden costs of doing so, such as increasing prices for small business insurance. This can include general liability insurance and workers' compensation insurance policies, among others.
