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In the years following the Great Recession, small business owners found themselves faced with limited access to capital as spooked lenders avoided risk as much as possible. And while small business lending has picked up a little in recent months, the dearth of funding has sent entrepreneurs away from their traditional bank in search of better pickings.

A recent Ernst and Young report found that nearly one in five businesses changed its primary bank within the past year, a sign that business owners are not having all their needs met at their traditional banking institution. “The post-crisis environment has been characterized by [small business] companies’ willingness to move material parts of their banking business if presented with a more attractive option,” the report said. “Relationship breadth or history alone is no longer enough of a deterrent to prevent switching.” In essence, loyalty is no longer enough of a motivating factor to keep small business owners coming back to a bank that can’t fulfill its financing needs.

And small business needs are getting harder for big banks to meet as it costs banks as much to originate a $100,000 loan as it does to make a $1 million loan. The effort just doesn’t pay off as well for the smaller loans. Plus, more than half of all small businesses are not even looking for loans as large as $100,000. According to one study, almost 40 percent of those seeking funding under $100,000, actually want less than $50,000.

Here’s where the alternative lenders have picked up the slack in recent years. The market has filled in the need for greater access to capital with options like crowdfunding, non-profit lenders and online lenders. Beyond just the standard small business loan lenders, all these choices can provide small business owners with the working capital necessary to keep their firms running smoothly.

 


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources