Under a headline ‘Small Business Lending Strong in 2010’ I found this lead sentence:
Lending to U.S. small businesses in 2010 saw it biggest year-over-year
gain since December 2006, according to the Thomson Reuters/PayNet Small
Business Lending Index.
Sounds good, yes?
So let me point out, a huge year-over-year gain up from a terrible year does not equate to small business lending being ‘strong’ in my view.
“The economic atmosphere for small businesses did not improve much in
2010,” said Denny Dennis, NFIB Research Foundation senior fellow, in a
press release. “We don’t expect credit levels to reach the levels they
did a decade ago.”
Some banks and credit unions are targeting small business lending and seeing an increase in their loan portfolio. But any blanket statement that small business lending is strong is misleading, don’t you think?
Why does it matter?
It matters because business owners and lenders are attempting to predict future performance in an uncertain environment. When business owners hear that small business lending is strong
- they may be surprised by a turn-down
- they may not request the loan far enough out to allow time to seek it from several sources
- they don’t know how to take it when they get turned down for a loan.
Fuzzy thinking
Lenders, if your borrower comes in and says their company experienced the best year-over-year growth in five years, be sure to look at how bad the previous year was before you let yourself be impressed!
