Small Business Lending: Where Do We Stand in 2024?

According to the Equifax Small Business Lending Index (SBLI) Report from April 2024, small businesses have shown impressive resilience in borrowing, despite not-so-optimistic forecasts. For nearly two years, a “dark cloud” has hovered over small businesses, as noted in the report, yet the anticipated pain hasn’t fully materialized. Business conditions remain stable, supported by surprising consumer resilience, and with inflation retreating, the Federal Reserve is set to slowly loosen policies in 2024.

Though this policy shift won’t dramatically boost the U.S. economy, it signals that the worst may be over. However, anxieties persist. Despite positive economic activity, small businesses remain cautious about the future, with sentiment suggesting a level of skittishness about what’s to come.

As of September 2024, data from Equifax’s SBLI looks promising, indicating stable loan volumes. But the Small Business Default Index (SBDFI), which tracks the percentage of small business loans and leases that have defaulted over the last 12 months, presents a different picture. Despite stable lending volumes, default rates have raised alarms, and this concern resonates with many small business owners I’ve spoken with.

Those with existing loans are anxious about how they will repay, while those considering borrowing are hesitant. Many are reluctant to expand or start new ventures, fearing it may not be the right time. This hesitancy stifles job creation, decreases wages, and ultimately lowers consumer spending—trends that can have a ripple effect on larger companies and financial institutions alike.

As my grandmother wisely used to say, “Money likes silence and hates to be stuck.” In this case, the financial system thrives when capital flows, not when it’s frozen in uncertainty.

A Call for Leverage in Tough Times

In today’s climate, I firmly believe that small businesses should leverage every available funding option—whether through grants, incentive programs, or alternative funding sources. Now more than ever, it’s crucial to be strategic and proactive in securing resources. Here are a couple of examples:

1. Choose Expansion Locations Wisely: Before expanding, consider the financial benchmarks, incentives, and trends in different states. Many state programs exist specifically to support business growth, so why not take advantage of them? These programs can often provide a crucial lifeline for your business by reducing costs or offering favorable conditions for growth.
2. Use Incentive Programs to Stabilize Cash Flow: While many support programs don’t hand out direct cash, they can cover expenses, reduce loan fees, or help in other ways that ultimately improve your financial flexibility. This means more stable cash flow and a stronger financial outlook when presenting business plans to lenders.

Looking Ahead: What Can We Do?

As an advocate for small businesses, I’m eager to hear from you—especially those in lending and finance. How do you view the current trends and forecasts? Are there ways we can better support small businesses in accessing funding and navigating this uncertain landscape?

I’d love to hear your thoughts on how leveraging existing funding options might impact your willingness to lend and work with these businesses. Can these programs make small businesses more attractive borrowers?

Let’s start a conversation—your insights can help shape a more supportive financial environment for small businesses.