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Lending to Microbusinesses Up

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By Minara El-Rahman on December 02, 2009 3:50 PM

In a bright spot of news, Reuters reports that borrowing by the smallest of all small businesses has grown, possibly indicating the beginnings of a small business recovery.

This is good news considering that many people believe that small businesses are the best way to economic recovery. They employ many Americans and they are the best way to create jobs in this economy.

According to Reuters, PayNet Inc for Reuters tracked the loan, lease and line of credit activity of microbusinesses. It discovered that U.S. businesses with less than $100,000 in outstanding debts began borrowing again warily this spring to invest in their businesses. This trend was constant until the very end of the study back in September 2009.

Reuters has quoted William Phelan, the President of PayNet as saying that this trend amongst microbusinesses indicates that the economy is on the road to recovery: "This looks like an inflection point. These little businesses are a leading indicator and the signals they're sending are improving."

Mr. Phelan credits government initiatives such as "cash for clunkers" as well as the new homebuyer tax credit as being reasons that smaller businesses have been rebounding.

In the meantime, there are critics who claim that real recovery comes from real consumer demand which has dwindled since the recession started. They have also criticized the big bailouts that were granted to the financial sector. They claim that these financial institutions have not opened up lines of credit. We blogged about how traditional small business loans have dried up in favor of credit cards with less favorable terms for small business owners here.

However in response to such criticism, Goldman Sachs and Warren Buffett had announced plans to help small businesses with access to loans, scholarship money and counseling. We wrote about Goldman Sachs 10,000 Small Businesses here.  

In spite of what critics may say, the findings from this study do point to a positive outlook, at least for smaller businesses.

If you are a small business owner, chances are you are probably trying to gain some access to capital for your small business. Please visit our Related Resources links for more information.

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