One quarter of small businesses and middle-market companies recently surveyed had obtained their recent credit from non-bank lenders, according to business advisory firm Greenwich Associates. Such is the difficulty – five years after the financial crisis — still being had by some SBEs in obtaining credit. But that’s not all of the story.
Greenwich Associates surveyed approximately 125 companies, and found that, of the companies that obtained credit over the past 18 months, one-quarter reported securing funds from non-bank providers.
Of those, 90% said they would use non-bank providers again, and 60% told Greenwich that non-bank providers made the process of obtaining credit easier than banks did.
These results tell us that banks now risk losing business in this important customer segment. It also tells us that some small businesses really are having a difficult time obtaining credit on good terms – even as large corporations report having an easier time of it than before the crisis.
Greenwich said that about a third of its SBE/middle market responders said they turned to non-bank lenders at least in part because their traditional banks refused to lend.
However, the rest of them said they chose non-banks based on these lenders offering favorable terms, conditions, rates and pricing versus traditional banks.
It’s clear that the non-bank lenders stepped into a void created when traditional banks shut off the lending taps to small businesses following the financial crisis. Since then, many of these lenders have improved their offerings, and are now beating out the banks on rates and terms.
Hopefully, there will be more competition for small business lending as the economy improves. After all, small business’ access to credit is a key component of growing the economy.
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