D&B survey reveals business borrowing flat

Recent research from business insight provider Dun & Bradstreet and Pepperdine University indicated that small business financing was flat through the first three quarters of 2012. The Pepperdine Private Capital Access Index (PCA) revealed those running businesses are still wary of obtaining financing.

Borrowing flat, loans difficult to obtain
The PCA showed that 32 percent of business owners had recently tried to acquire business funding, but many entrepreneurs claimed circumstances are holding them back from getting the loans they seek. Seventy-six percent of business owners reported thinking obtaining a loan was too difficult. Sixty-three percent claimed credit restrictions prevented them from expanding, a number which rose from 64 percent in the first quarter of 2012. Another 53 percent said credit restrictions limit their hiring, which could impact their businesses.

"The most recent PCA results suggest that businesses and lending institutions alike see clouds on the economic horizon, with responses trending in a way that points to general economic weakness," said finance professor Dr. John Paglia, director of the Pepperdine Private Capital Markets Project. "Our index data indicate that business owners are very cautious right now, and that their demand for financing, plans for growth and expected hiring are all down."

Low confidence could be due to fiscal cliff
One reason for low business confidence and and the small number of companies currently seeking loans could be the impending "fiscal cliff," a combination of tax increases and spending cuts scheduled to kick in automatically if the federal government can't reach a budget and deficit agreement by the end of the year. In fact, audit and advisory firm KPMG recently released a survey that revealed many business professionals don't expect lawmakers to come to an agreement before December 31.

According to the survey, 48 percent of respondents claimed they did not anticipate that the government would be able to develop a policy to stop the fiscal cliff. Thirty-two percent imagined it would be possible for lawmakers to reach an agreement, while 19 percent were unsure.

However, a significant amount of respondents also expected a temporary "stop gap" measure to be put in place. Seventy-seven percent imagine such a solution is possible to avoid devastating effects on the economy.

It remains to be seen whether an agreement can be made on this issue, and if so, how it will impact business confidence and the willingness of entrepreneurs to take out loans.

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