Banks Approving More Business Loans

Here is an interesting piece of news. According to an article on Bloomberg Business Week - banks are approving more loans. But there are two important facts: Most business loans are still being rejected (about 60 %). And, "Most business loans were rejected because of concerns about borrowers’ earnings, cash flow, or collateral".  Said differently - it's still pretty difficult to get business financing for the same reasons it has been difficult for the past few years. I don't think this will change in the foreseeable future.

This puts a lot of small and new companies in a bind. They need business financing but can't get it. For most, the only option is to consider alternative financing, like factoring or purchase order financing. Both these options are good, if the type of problem you have fits their model. For example, invoice factoring will help companies that have cash flow problems due to slow paying clients. And purchase order funding will help re-sellers that have pre-sold purchase orders. But what if you need to buy inventory or equipment? Sure, there are other alternatives but a line of credit (or business loan) can be the most flexible at times.

It's good news that business lending is increasing. However, to have an economy that is firing on all cylinders, business lending needs to increase. But - it has to be responsible business lending.