A Not-So-Fond Look At How The Recession Hurt Lending

Business Lending in the Recession
Reading Time: 2 minutes

There’s plenty of hand-wringing going on about the state of lending in this country, and with good reason. Anyone who remembers the good ol’ days of early 2007 and before knows that the economy just isn’t what it used to be.

Still, though, you have to appreciate how far we’ve come in the last year or so. For that, of course, you’ll need the proper perspective.

We’ve got that from the invaluable Small Business Trends, who recently put together a little article proving that banks simply stopped lending for more than three years. If you want a sense of how much better things have gotten and how far they fell starting in 2007, check out this quote:

The number of bank loans to small businesses dropped a whopping 68 percent between 2007 and 2010, and the dollar value of the loans declined 55 percent in inflation-adjusted terms. These drops are much larger than the 9 percent decline in the number of small loans to business and the 10 percent slide in the the real value of those loans observed over the same period.

Like the small loans to business numbers, however, the small business loan numbers show that the fall in lending to small companies didn’t just occur during the downturn but continued into the recovery that followed. From 2009 to 2010, bank loans to small businesses fell by 32 percent, and the dollar value of the loans declined 11 percent in inflation-adjusted terms.

As we’ve said before, now is not the time to get a bank loan. Now is the time to check out those alternative lenders who survived the recession and are filling that sizeable void. Until the economy really and truly rebounds, they’re simply the best place to get a business loan. We’re guessing you’ll need one at some point.

How did you fare during the recession?


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