Small businesses are gradually having to pay even more for their loans, in line with a new survey that evaluates credit limitations for more reasonable ventures across the Europe and US.
48% of small and medium sized businesses said that they can acquire funding below 8% rate, according to a survey performed by C2FO, a financial technology start-up that has formed a market where small and medium sized businesses can get early paid by the large companies they supply. The survey, released last year, confirmed almost 60% of respondents were able to get business financing at below 8% rates.
The survey comes despite standard interest rates hanging around at record lows, especially in Europe where the central bank has started buying corporate bonds to decrease the borrowing costs. A directive introduced after the 2008 financial crisis, in addition to a persistent wariness of precarious loans, is frequently said to have made small business lending much less striking for banks, encouraging new applicants who are keen to grab a slice of the market.
Dru Shiner, a C2FO’s chief sales officer said that “the capital cost is increasing remarkably and we were astonished by the extent of it on the current survey performed this year”. “Majority of small businesses work with small and local banks, particularly in the United States, and due to all of the new directives, the risk of credit and other matters they should navigate is making them lend to larger businesses.”
C2FO investigated over 1,800 small to medium sized businesses in the United States, United Kingdom, France, Italy and Germany, with almost 80% of these businesses having $2 million or less in annual gross sales. It discovered that the borrowing was expensive in the United Kingdom and the United States with 42% and 47% of small to medium sized businesses borrowing at below 8% rate. That compares with 58% respondents in Italy, 52% in France, and 51% in Germany.
The higher cost of capital caused them to look different sources, such as peer-to-peer lending or marketplace lending that entails directly matching potential borrowers with the lenders. Generally, according to the survey, almost 18% of the respondents in each country reported using peer-to-peer lending at some point.
More expensive credit in the United States stands to some extent chances with the most recent study from the National Federation for Independent Business (NFIB), which demonstrated only 3% of small business owners reporting in July that their borrowing requirements were not fulfilled“- 1 percentage above the record low reached in September of last year. Still, the NFIB small business optimism study has been sputtering with response making little to no improvement over the last year, rising just 0.1 points to a low reading of 94.6 in July.
Bill Dunkelberg, Chief Economist of NFIB, said that uncertainty is high and expectations for better business conditions are low, and future business investments look susceptible.” Our records specify that there is little optimism for a heave in the small business region anytime soon.”