Small Business Lending Picking Up?

Small businesses are getting more interested in borrowing, a sign that they're growing more optimistic about the economy.

In a survey of bank loan officers by the Federal Reserve, nearly a third described loan demand from small companies as stronger during the second quarter than it was during the first three months of the year. Sixty-one percent said demand was about the same and 7 percent described it as weaker.

During the first quarter, about 22 percent of survey participants said demand was stronger, nearly 65 percent said it was about the same and nearly 14 percent said it was weaker.

Because there is a strong connection between small business confidence and borrowing, the survey indicates that company owners are getting more optimistic. Many have been reluctant to borrow since the recession because the economy and their own revenues were too uncertain. Many owners have also focused on paying down their existing debts to clear up their balance sheets.

Other recent surveys have shown that owners are more confident about the economy.

The Fed defines a small business as having less than $50 million in annual revenue.


The number of Small Business Administration loans for real estate and equipment purchases has fallen sharply after the expiration of a federal law last September.

There are 504 real estate and equipment loans whose funding is being completed during August, down from July's 590 and the 12-month average of 643, according to the National Association of Development Companies. The trade association represents nonprofit companies that are certified by the SBA to provide real estate and equipment loans.

The loans were granted under what's called the SBA 504 program, which was expanded following the recession to allow refinancings as well as loans to purchase of real estate and equipment. A federal law that provided for refinancings expired last September.

A bill is pending in the Senate to reinstate 504 loan refinancings.


The improving economy is making investors in small technology businesses more confident about the future for high-growth companies, according to a survey of Silicon Valley venture capitals.

The Silicon Valley Venture Capitalist Confidence Index rose for the fourth straight quarter 3.78 on a five-point scale during the April-June period. The index, compiled from a survey of 30 venture capitalists, measures how confident they feel about the environment for high-growth entrepreneurial companies in the San Francisco Bay area over the next six to 18 months. The index was compiled by Mark V. Cannice, a professor of entrepreneurship at the University of San Francisco.

Venture capitalists quoted in a report accompanying the index cited slow but steady growth in the economy as a reason for their increasing confidence.

"We're no longer worried about falling off a cliff," said Bill Reichert of Garage Technology Ventures.

Venture capitalists are also more optimistic because the market for initial public stock offerings has improved. An IPO is one way that investors can recoup the money they put into a company; when it goes public, they can cash out their shares.

They're also more confident because of expectations that there will be new investment opportunities in cloud computing, mobile technology, social media and energy efficiency.

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