MultiFunding's National Small Business Lending Snapshot Results
First Quarter 2011
This report is a summary of key findings from MultiFunding’s First Quarter National Lending Snapshot. The objective of the study is to determine amongst small business owners looking for loans in today’s market – what loan types they qualify for and what interest rates they can expect to pay for their loans.
Business Owners Divided Into Three Groups By Lenders
Based on financing trends found in our research, today's lender examines potential small business clients in one of three categories. The interest rate and type of loan granted is based on this categorization.
1. Asset Rich Business Owners - (31% in our study)
These are business owners with assets and/or cash. They are fortunate in that they still have equity left in their homes, buildings, and equipment that is sufficient enough to meet the collateral requirements of banks and SBA lenders. These borrowers benefit from interest rates between 3% and 8% a year. Ironically, the government supported SBA programs favor this group. They can benefit from a commercial mortgage or a loan program backed by the SBA.
2. Marginal Business Owners (47% in our study)
MultiFunding Study - Statistics and Findings
On a quarterly basis, MultiFunding utilizes a sample of 250 randomly selected small businesses currently looking for financing for their businesses. This information is analyzed and examined to determine trends in the lending market. Following are the findings for the first quarter of 2011:
The research team examined 250, geographically diverse small business owners referred to MultiFunding for lending assistance. The participants were either established business owners or entrepreneurs that sought to purchase an existing businesses. All had an annual revenue averaging 750K and sought an average of 325K in funding. The study did not include start-up entreprenuers or businesses.
We extensively examined each participant's collateral, credit and cash flow, then assessed the loan type and interest rate the participant could expect.
Based on these lending trends, MultiFunding has concluded that there is a national lending crisis facing the nation’s more than 30 million small businesses. This situation is not adequately reflected in the data published by the nation’s leading lenders. The situation is particularly challenging for small businesses with income under $1 million per year as these interest rates pose a problem with staying in business.
Research showed that, in today's economy, collateral is a key factor in determining interest rates. Credit and cash flow, previously important in assessing a small businesses' credibility, have taken a backseat to equity in their balance sheet.