Small business owners were among those most affected by the credit crunch brought on by the recession. As the U.S. economic recovery becomes more fact than fiction, reports are showing small business owners getting their credit situations under control. Stability begets growth, and growth means we can expect continued improvements in the unemployment rate and the economy as a whole.
According to a recent nationwide credit data study by Direct Capital Corporation, the average credit profile for small business owners improved in 45 out of 50 states. Nebraska business owners enjoy the strongest average credit profile, while Washington, D.C. business owners are still struggling with the lowest average credit profile.
The other four states among the top five were Alaska, South Dakota, Indiana and Oklahoma. States sharing the bottom of the barrel with D.C. were Rhode Island, New Mexico, Montana and Texas.
As average business owner credit profiles improve, some finance industry analysts are concerned about increasingly scarce credit sources for small businesses. As we’ve reported before, Section 1071 of the massive Dodd-Frank Act could burden banks with suffocating regulatory requirements, stifling lending to small businesses in turn.
The reason is that Section 1071 opens the door for federal regulators to standardize business loans in much the same way mortgages and automotive financing have been standardized. Federal regulators will have authority to determine whether or not a bank has made ‘enough’ loans to women and minority-owned small businesses, and whether interest rates and fees were fair. The stated purpose of the law is to ensure fair lending, but effective implementation is next to impossible without regulators looking at every loan application and considering all factors affecting loan decisions. Smaller lenders may find the costs of ensuring compliance and the comparative risks too great to justify small businesses lending at all.
One certainty is many business owners who turned to leasing when equipment purchases were not feasible due to credit unavailability, market fluctuations and the general economic upheaval will elect to continue leasing, finding leasing to be a suitable alternative to long-term financing.
If you are a lender or a lessor, this may be the perfect time to consider expanding your lease products and portfolios. The attorneys at Glass & Goldberg provide high quality and cost-effective legal services and advice for clients in all aspects of business litigation and transactional law, including structuring and implementing complex leases. Call us at (818) 888-2220, email us at firstname.lastname@example.org, or visit us on the web at www.glassgoldberg.com to learn more about the firm and to sign up for future newsletters.