Whether you are starting your own cupcake business from home or buying an existing accounting business from someone else, borrowing money is one of the most common sources of funding for a small business. After the financial crisis of the past few years, most small and medium-sized businesses have literally had banks and other lenders slam the door in their faces.
From 2009 to 2011, the volume of business loans declined more than 25 percent. In cash terms, commercial lending went down $325 billion over those two years; the volume of small-business loans, which are generally defined as loans of less than $1 million, fell by $26 billion, and then kept on falling. By June 2012, small-business loans were down $56 billion from their June 2009 peak of $336.4 billion.
Of course, it helps to remember what banks were going through at the time. Once the financial crisis was in full swing, banks faced tremendous pressures. Regulatory bodies from Government institutions introduced capital requirements that forced banks to reduce their exposure to risk – and unfortunately being classed as “small” were now considered as non-core business for banks, who were lowering corporate costs, and all ties were severely cut.