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For the first half of 2012, small business lending has been like a roller coaster ride with steep, scary drops and a few slow inclines – everyone put your hands in the air!

December 2011 – The initial ascent on this roller coaster ride – that long, slow climb to the peak, right before the bottom falls out.

At the end of last year, small business owners began to see some signs of hope in regards to landing that much needed business loan – capital needed to grow their business or too just simply survive the continued economic flat line.

In fact, according to a study that measures the overall volume of lending to small businesses in the U.S., the Thomson Reuters/PayNet Small Business Lending Index, December 2011 saw a 19% increase in financing to small businesses – marking the 17th consecutive double digit increase. Not bad given the tumble the credit markets took (especially to small businesses) in 2007.

This December increase put small business lending at its highest level since the market crash. Interestingly enough, December also marked the largest growth in the U.S. economy over the prior 18 months – coincidence? Maybe. Or, did this increased small business lending drive additional economic growth?

January 2012 – The Beginning of the trills (or frights) to come.

Small business owners seemed to, according to CNBC, back off in the first month of the year. While it might have appeared that banks and other lenders were still willing to approve these loans (loans under $1 million), small businesses retreated.

“Business owners remain spooked by the events of the past four years, and are assuming less risk,” stated William Phelan, president of PayNet. He further went on to declare that while many expected that small firms would begin to take on more risk in acquiring business capital, that instead, “… we’re seeing a plodding expansion.” – Small businesses owners just sitting back and watching what the New Year would bring after the stealer end to the previous year.

February 2012 – Downward hairpin turns just to keep the riders in their seats.

The Thomson Reuters/PayNet Small Business Lending Index for February showed lending slightly up over January (some 0.10%) but was still considered rather flat. In fact, the meager increase for the month was the lowest over the previous 12 months.

However, overall economic growth was slow as well – most likely related to the cooling off after the anxious holiday season.

March 2012 – More twists and turns to set up the next stomach churning section.

Again, the Thomson Reuters/PayNet Small Business Lending Index for March showed sagging results; blaming March’s downturn on a slowing overall economy – even as consumer spending showed modest increases.

Once more, is one leading the other? Is the draw back or lack of confidence from small business owners driving down the economy or is it the lifeless economy prompting small businesses to pull back? In either case, the Federal Reserve (Fed) was forced to announce that it was keeping interest rates at near bottom level for the next 2 years or so.

So, March showed low interest rates yet, according to Reuters, small entrepreneurs were just more focused on paying back debt as opposed to expanding their operations. Further, according to the Federal Reserve Board, “On net, bankers reported having eased their lending standards on commercial and industrial loans to all firms and having experienced an increase in demand from firms of all sizes.” But, clearly loan volume was down and those loans that were approved were funded for smaller amounts on average.

To read the full article – Click Here – Steve Johnson – – August 8, 2012

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