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Businesses having a harder time getting credit, survey finds

Small and mid-sized businesses are having a harder time getting credit and that’s having an impact on their plans to hire.

Those are findings of a quarterly survey of small businesses released Monday by Pepperdine University’s Graziadio School of Business and Management and Dun & Bradstreet Corp. The third-quarter survey questioned 752 small and mid-sized businesses, with some of the results broken out by company size.

Small and mid-sized businesses are having a harder time getting credit and that’s having an impact on their plans to hire. (AP Photo/David Goldman, File)

Small and mid-sized businesses are having a harder time getting credit and that’s having an impact on their plans to hire. (AP Photo/David Goldman, File)

Companies of all sizes said it was harder to get loans; 59 percent said it was difficult to get debt financing, up from 56 percent in a survey in the second quarter. Businesses had more trouble getting bank loans, a sign that financial institutions may be getting cautious amid an economy that has weakened since the start of the year. Twenty-eight percent of small businesses reported success in getting bank loans during the previous three months, down from 31.6 percent in the second quarter. Mid-sized companies also had a tougher time, with 75 percent reporting they could get bank loans, down from nearly 90 percent.

While banks have increased their lending to small and mid-sized businesses following the Great Recession and the ensuing lean years, lending officers are likely becoming more cautious as signs point to a slowing economy. Small businesses are seen as having the greatest risk for lenders.

Companies expect it to be harder to be approved for loans in the coming months — 56 percent of those surveyed predicted it will be more difficult versus 52 percent in the last survey. Still, bank loans are the preferred method of financing companies most expect to get — 68 percent cited banks as their most likely source of outside money.

Hiring expectations are slightly lower, with 30 percent of all companies not expecting to add jobs, up from 28 percent in the second quarter. Access to capital was the No. 1 reason why companies don’t expect to hire; it was cited by 46 percent. Economic uncertainty was the second-most often cited at 24 percent, but that was an improvement over 32 percent in the previous survey.

Banks may be more hesitant to lend because revenue expectations are falling. Small businesses on average expect their revenue to rise 6.9 percent over the next 12 months, down from a prediction of 7.3 percent in a second-quarter survey and 7.5 percent in the first quarter. At the end of 2018, the forecast was for an 8.5 percent gain.

That increased pessimism wasn’t surprising given that there was a drop in the number of companies reporting they were profitable in the last quarter — 55 percent of businesses of all sizes, compared to 58 percent in the previous survey.

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