This article is reprinted by permission from NerdWallet. It’s been a difficult year for business owners seeking financing, according to NerdWallet’s 2023 Small-Business Financing Index. While loan volumes are relatively stable, high interest rates and low optimism may make some entrepreneurs reluctant to apply for funding.
“Small businesses are facing … a lending downturn and definitely the threat of an impending recession,” says Carolina Martinez, CEO of the California Association for Micro Enterprise Opportunity, an advocacy group focused on very small businesses. “We’ve seen a lot of small businesses not applying directly to banks, thinking they’re not going to be approved.” As interest rates rise, financial institutions tend to tighten their lending standards. To compete, small-business owners should focus on maintaining clean books and shopping around for lenders willing to work with them — even if it takes a little longer to get funding. “It is important for a small business to not prioritize how fast they can get the money over what kind of money they are getting,” Martinez says.Financing index trails 2022 NerdWallet’s Small-Business Financing Index was in the 100s as recently as August 2022. But since then, it has fallen to new lows of around 91. This indicates that small-business owners are facing higher interest rates, using less financing, having more trouble keeping up with bills and feeling less optimistic about their futures than they were in our last report a year ago.
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