News

Fed survey substantiates small business loan cutbacks

October 18, 2010

If your prospective franchisee pool is still dry, at least The Fed can help substantiate how little funds they’re able to borrow.

The information comes from a survey from the Federal Reserve Bank of New York, which surveyed 426 small businesses this past summer, according to Inc. Magazine. “Small businesses” were defined as having 500 or fewer employees and less than $25 million in revenue.

About six out of 10 small businesses applied for credit this past summer. Half of them were denied credit. Of those who were approved, 75 percent said they weren’t getting the full amount requested.

From the story:

Other survey findings: Loyalty had little effect on loan outcomes – companies that borrowed in 2008, and so had an existing bank relationship, were rejected at the same rate in 2010 as other companies surveyed.

Who tended to get approved for credit? Companies that were at least five years old, showed growing revenues – or had enough cash on reserve that they didn't need financing in 2008.