DALLAS (November 13, 2008) — Despite reports that it's near impossible for small businesses to get loans, Terry Neese, NCPA Distinguished Fellow and small business expert, says since smaller community banks were not directly involved in the subprime lending spree, which was essentially the root of the financial crisis, they have money to lend to small businesses.
"The problem isn't that community banks don't have money to loan to small business owners," Neese says. "But that small business owners are afraid to borrow because, with the downturn of the economy, they're not certain if they will be able to pay the loan back."
In a New York Times article yesterday, it was stated that although smaller banks are lending money, local bankers are being much more cautious, either by writing smaller loans or requiring more collateral.
According to a Federal Reserve Survey last month, 75% of domestic banks reported tightening their lending standards for small businesses.
"Now is a good time to develop a relationship with your local bankers, if you don't have one already," Neese said. "Small business owners will find that bankers are more willing to listen to your individual situation if you already know them. Don't wait until it's time for you to borrow money before you contact them."