Small companies are getting more interested in borrowing, but many are still finding it hard to get loans from banks.
That's the finding of a quarterly survey of small businesses released last week by Pepperdine University's Graziadio School of Business and Management and Dun & Bradstreet Corp.
An index that measures small companies' demand for financing, including loans and investment money, rose 3.6 percent, to 37.5 from 36.2, in the third quarter. A separate index, which measures their ability to get financing, rose 0.2 percent, to 33.1 from 33.
But while demand is up, many owners aren't in the market for credit. Thirty-eight percent of small companies didn't get any credit in the last quarter. And small businesses are still finding it harder to get loans than mid-sized ones do—61 percent of small company owners called debt financing difficult to get versus 31 percent of mid-sized business owners. During the previous three months, 36 percent of small businesses were able to get bank loans, compared to 69 percent of mid-sized companies.
The survey findings show that owners who have shied away from risks like borrowing ever since the election may be feeling more secure about taking on debt. But banks that are adverse to risk, especially given the rules imposed on them by the Dodd-Frank banking law, are still wary about small companies.
On a positive note, many companies wanted financing because they want to grow or acquire another business—44 percent of small businesses and 47 percent of mid-sized ones. And 46 percent of small companies and 70 percent of mid-size ones who weren't trying to raise financing because said they didn't need the money because their cash flow is good.
The survey, conducted from Oct. 31 to mid-November, questioned 1,341 companies from the Dun & Bradstreet database that have revenue up to $100 million. Dun & Bradstreet compiles credit reports on businesses of all sizes.