A new study by TD Bank found that 60% of small business owners report rising stress levels in running their companies. The survey also revealed a common culprit: managing the business finances.
The study solicited responses from 400 small business owners who were asked to identify areas of stress within their company. Of the 60% who indicated that they were stressed by their business, one-third reported that managing their business finances was the most difficult issue. A fifth of owners reported that employees were the source of trouble, while a smaller percentage said sales and marketing were their biggest concerns.
What’s Wrong with Small Business Banking?
TD Bank’s survey shows that small business owners are mostly concerned and stressed about a lack of support for their operation by the banking community. A lack of available customer support was referenced by 28% of respondents.
A lack of customer support hits on a critical issue within the small business community. Banks cut back on their lending facilities to small businesses while reducing the number of commercial bankers and other workers who work with small business owners to streamline their enterprises. Small business owners have recently reported that the market for small business lending is especially weak. Banks have tightened lending standards to a point at which only a small minority of businesses can acquire standalone business financing.
The Discrepencies in Lending Reports
Banks report that they loaned $11 billion more to small businesses in 2012 than in 2011. However, after a careful economic survey of the FDIC’s data on small business lending, it appears that banks have actually cut their lending to small operations. The FDIC’s comprehensive data shows a $2 billion decline in small business lending over the previous year.
The discrepancy can be explained. Banks report their lending as total credit issued. That means that when a bank issues a credit line worth $25,000, it can report $25,000 in lending activity. However, if a business uses only a fraction of its credit line, then the full reported amount is not actually issued by banks to the business community.
So while the headlines reveal stronger bank lending, banks may only be adding to the credit lines of businesses who do not intend to use them. Other businesses which do not have existing credit still find it difficult to get through the application and approval process with banks citing the riskiness of small business financing.
Business owners do have some choices, however. Small business grants have grown at an incredible pace with new monies flowing from state and federal governments in a bid to boost job growth. Grants for women, minorities, and first time small business owners are especially popular, making up the majority of the growth in grants to small businesses.
Those looking for small business capital will find it from grants – grants are essentially “gifts” that never have to be repaid. Unlike a bank loan, a grant is meant to be spent and consumed by the business.