Tuesday, December 14, 2010

Despite Cheap Money, Small Businesses Are Reluctant to Borrow

The National Federation of Independent Business (NFIB) reported that although interest rates remain historically low, most small business owners are not interested in borrowing.

The NFIB reported that 91 percent of small businesses had either their credit needs met or were not interested in borrowing. Only 9 percent of small businesses reported that not all of their credit needs were satisfied; however, a record 53 percent said they did not want a loan. A record low 28 percent of all owners reported borrowing on a regular basis.

Reported and planned capital spending are still hovering near 37 year record low levels. Capital spending seems to be primarily in “maintenance mode” – if it breaks, replace it, but that’s it. This low level of capital spending is not surprising given that the Small Business Optimism Index remains in recession territory.

Only four percent of small businesses reported financing as their top business concern. On the other hand, 30 percent of the owners reported that weak sales continued to be their top business problem, followed by 22 percent citing taxes and 15 percent government regulations and red tape.

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