Survey finds business owners more optimistic about securing credit

With improving cash flows and revenues, small-business owners are now finding it less difficult to obtain credit, according to a Wells Fargo and Gallup quarterly survey that polled 603 small-business owners in various industries nationwide, and New Jersey appears to be closely tracking the trend.

With improving cash flows and revenues, small-business owners are now finding it less difficult to obtain credit, according to a Wells Fargo and Gallup quarterly survey that polled 603 small-business owners in various industries nationwide, and New Jersey appears to be closely tracking the trend.

“The loan volume and loan pipeline in New Jersey are very supportive of the trend nationally, in terms of increased optimism,” said John Cole, Wells Fargo’s New Jersey, New York and Connecticut business banking manager. “Demand for credit is improving as small-business owners are more willing to invest.”

According to the survey, conducted between April 2 and 6, 39 percent of respondents said they were able to obtain all the credit they needed in the past year, and the number of small-business owners who found it difficult to secure financing in the last 12 months fell from 33 percent in January 2012 to 30 percent. Small-business owners who expect to face difficulty in obtaining credit over the next year also declined, from 38 percent to 32 percent, and 14 percent of respondents said they planned to apply for new credit within 12 months.

Cole said banks have not changed how they underwrite credit from the previous quarter, so small businesses’ increased access to financing stems from improved cash flows and revenues, since the ability to get credit improves as a business gains more cash flow.

“As sustained cash flow improvement occurs, businesses need to grow and compete, and one way to accelerate is to use a loan to make an investment quicker,” Cole said. “If they have to do it from their own equity, it might take twice as long. That becomes the case for borrowing.”

Though small-business owners are finding it easier to gain access to financing, a majority of respondents indicated they use credit to fulfill short-term needs — like keeping their business open, increasing profits and improving day-to-day operations — while only 21 percent said having credit has allowed them to hire more employees.

“I wish it was a bigger number, but at least you are seeing some of that hiring,” Cole said. “We’re seeing a lag effect … but the picture is getting better.”