When the financial crisis hit, panicked small businesses were scrambling to find credit. Nearly three years later it’s a much different story.
The level of credit shopping – when a borrower seeks a loan or lease from more than one lender – by small businesses has fallen nearly 30 percent since September 2008, according to new data released by PayNet Inc and it may lead lenders to offer better terms said William Phelan, PayNet’s president and founder.
“It indicates that it’s not a very competitive market right now,” said Phelan, whose Skokie, Illinois-based company released the data as part of the launch of its new Credit Shopping Indicator, which measures the number of lenders a borrower shops for business credit. “In 2008 you would have expected it to be high because of the recession and the lack of availability of credit.”
Phelan said back then the indicator registered 118 – a record – and far above pre-recessionary levels in January 2005, when it sat at 100 – the point at which a borrower typically shops for credit at more than one bank. Today it stands at 84.
This dip is actually good news for small businesses, who should take the opportunity to ask for better loan terms from lenders, said Phelan.