Small Business Loan Trends: What You Need to Know

Small business lending is evolving and the future of getting a small business loan will never be the same. Since 2011 the 2008 economic crisis lending has hit somewhat of a standstill, both commercially and personally; and now with the rise in alternative lenders and lenders like Kabbage, creating partnerships with banks to give customers better and longer terms and more flexible products, small business loans are trending up. This means that now is the time to find the right financing option for your small business and to get informed on small business loan trends.

Small business lending has turned a corner. Traditional lenders have realized how important small businesses are to the nation’s economy and are committing to lend more and more to these types of companies. In fact, one of the biggest lenders in the nation, Wells Fargo, has promised that by the end of 2018, they will have lent out $100 billion to small businesses alone. Small businesses have more options than they ever did before when it comes to seeking loans and working capital. Small business lending approval rates rose from 18.8 percent in March to 19.4 percent in May, which is a record high since the economic downturn.

Recently a few new market trends have emerged when it comes to small business loans. These trends are initially positive for small business owners, albeit competitive. Check out some of the most recent, and most exciting, small business loan news below.

6 Small Business Loan Trends You Need to Know

#1 It’s Easier to Get an SBA Loan

Thanks to the Small Business Administration, it is now easier than ever before to get a small business loan. Don’t get confused and think that the SBA itself is lending out money or saying yes to anyone who applies. Rather, the SBA is guaranteeing a portion of small business loans, making it easier for financial institutions to lend to them. There are still a variety of qualifications you will need to pass in order to be eligible for a small business loan (size requirement, finance qualifications, and lender qualifications). There are a variety of programs backed by the SBA like the 7(a) Guaranty Loan Program, SBA Express Program, and the Micro Loan Program.

#2 The Rise of Non-Bank Alternative Lenders

The biggest trend is the increase in alternative lenders in the small business loan marketplace. Traditional lenders like banks and credit unions have made it difficult in the past for small business owners to get a loan. With all the hoops they expect you to jump through plus the amount of time it takes to get your application approved, it is no wonder that alternative lenders like Kabbage have become so popular. The current trend is shifting toward more and more small businesses seeking alternative solutions to traditional lenders. This is most likely due to the current low interest rates.

#3 Traditional Lenders Working More, and Better, with Small Businesses

Last month Wells Fargo, one of the largest traditional small business lenders, committed to lend $100 billion to small business in the United States by 2018. This is sure to be picked up my more large traditional lenders as they come to realize what a large part small businesses play in our local economies. From 2008 to 2012, access to capital from traditional lenders for small businesses came to screeching halt. In fact, traditional bank lenders like Celtic Bank have turned to alternative lenders like Kabbage to help finance more small businesses!

#4 Increase in Middle-Market SBA Loans (up to $5 Million)

Back in 2010, the SBA increased its loan size to $5 million for the 7(a) loan program, which made it even easier for medium sized businesses, which often needed larger loans, to get funding to help their business grow and thrive. Before 2010, SBA loans were more popular and more targeted at new businesses and smaller “mom and pop” businesses. Due to the increase in SBA loans, however, there has been a trend in more experienced traditional lenders who frequently give out SBA and commercial loans lending to middle market businesses, which didn’t previously benefit from any loan program on the market.

#5 Lending on the Go

Another trend in small business lending that has taken off recently is mobile lending. Because it has become so easy to access working capital, alternative lenders have taken it one step further by providing working capital on the go. Many alternative lenders offer apps for your smartphone that allow you to manage your accounts remotely. Kabbage’s mobile app was the first of its kind to actually allow you access to working capital on the go while also allowing you to qualify from your phone and receive cash in as little as seven minutes! Technology is making it easier than ever to connect with your financial institution quicker and with less hassle.

#6 Cash Flow is King

This last trend has been around since the advent of small business lending. Your cash flow says a lot about your business overall, and it is one of your most valuable assets. When lenders look at your business, they will always take your FICO score and cash flow into account. If you have a good average cash flow, getting a small business loan can be a cinch. If not, you can be seriously derailed. In fact, banks are looking at their clients cash flow cycles all the time to assess their financing options. Many larger banks are looking into their middle market accounts to see where they can lend even more money than before. Having a positive cash flow will help you tremendously when it comes to financing your business.

As times change, so do market trends, especially in the financial world. This year we are seeing a dramatic boost in how small and medium-sized businesses are funded. This boost is great for our local economy and small businesses around the country because it helps keep small businesses flourishing. What trends have you seen recently in the financial arena? Are they affecting the way you find funding for your small business?

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