If you are looking to start a small business, then you will likely need to take out a loan in order to invest in the infrastructure needed to get your company up and running. Fortunately, the amount of loan approvals is steadily increasing. October 2017 saw 25% of small loan applications accepted by big banks, a climb of 0.2% on the previous month. During the worst period of the recession, less than one in ten loans were accepted. This could therefore be a better time than any to make that leap from employee to business owner. So why has this increase occurred?
Despite uncertainty and drama surrounding the election of Donald Trump, the U.S. and global economy has been performing well. Unemployment is at a 16 year low as businesses expand. As a result of a strong economy, the Federal Reserve has increased interest rates, meaning that approving loans is likely to be more profitable. If a small business owner can achieve good business credit, there is little risk involved in lending to companies looking to invest.
Lower Tax Rates
With Trump looking to reduce corporate tax from 35% to 20%, banks are more willing to offer loans to small companies who will be able to keep more of their profits and put this money into loan repayments. This, combined with a strong economy, means that many small businesses are looking to expand and hire new labour. Banks are understanding that with tax cuts, small businesses are more likely to have the means to meet their loan repayment commitments.
Stock Markets Performing Well
The U.S. stock market has already grown over 19% in 2017 and banks are optimistic about lending to new companies. October was a particularly good month, with the Dow Jones industrial average growing by 4.3%. November is set to look similarly strong. This growth has been seen among small and large businesses alike and banks are looking to take advantage of this by offering out more loans than usual.
If you’ve been looking to start your small business, but have been concerned about securing the loan required to do so, then now is a better time than any to give it a go. While large banks are still rejecting three quarters of loan applications, acceptance rates are at a post-recession high. A combination of strong economy, low taxes and a growing stock markets means that banks are in a good position to lend to businesses with good credit scores.