Small Business, Big Lending

by Banking.com Staff March 8, 2012   Insights

After such a prolonged period of doom and gloom in the global economy, any uptick in lending from financial organizations is cause for celebration. Now maybe, just maybe, we’re headed that way.

First, the good news: Flush with deposits, banks around the world have money in their coffers. Next, the better news: They’re more inclined to make loans in 2012 than they have been for a while (as in, the recession). Finally, the best news: Small businesses, often seen as the true engine of growth, are likely to benefit the most.

That’s the word in a new report from Omega Performance Corp., based on a survey of 409 respondents around the world, and it offers an interesting snapshot of how bankers see the near future. And by all accounts, what they see is good. In fact, 69 percent of global bankers reported a positive outlook for the global economy over the course of the year. For the record, no one’s looking through rose-colored glasses just yet: Only 12 percent predict “drastic” improvement on a global scale, while 57.2 percent see it improving “slowly.”

It’s in the area of lending practices that we see the greatest changes. Well over half the banks surveyed forecast greater lending on the consumer front, and the numbers are even higher for EMEA. It’s an even better story on the commercial side, but this time, the outlook is rosier in the North America, particularly the U.S., with a whopping 72.5 percent.

Going one level deeper, there’s an even brighter spot. Nearly three-quarters of the respondents said that their financial institutions will increase small business lending. Of those, 61.1 percent will do it slowly, while 12.7 percent see a drastic jump. The corresponding numbers for the U.S. are even higher, collectively clocking in at 77 percent. In fact, this sector dominates the target markets for banks—76 percent globally, and 78 percent in the U.S. On a related note, more than two-thirds of respondents in the U.S. plan to actively pursue leading to mid-sized and larger business as well.

It’s not all good news: For example, construction and multi-family homes (considered bellwethers of the industry) still rate below credit cards and auto loans around the globe. As for individual housing, the number for Canada is significantly higher than the U.S.: 57.8 percent over 42 percent.

Again, like all surveys, this is just a snapshot in time. But considering the cascade of gloomy reports and dire forecasts that we’ve almost become accustomed to, any positive signs are welcome. Here’s hoping there are many more, and soon.

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