Small business lending drought has hurt Scottsdale, Arizona

Area of the Sonora Desert in Scottsdale, Ariz.

Small business lending in Scottsdale, Ariz., has been about as dry as the Sonora Desert. (Photo Credit: CC BY-SA/Wars/Wikipedia)

Convincing banks to write short term loans for any size business has been difficult lately. Large-scale operations with multiple sources of capital can subsist, but small businesses like those in Scottsdale, Ariz., need short term loans in order to operate and expand. The Arizona Republic reports that banks and businesses have very different views of the current small business lending climate.

Scottsdale short term loans enable companies to hire

The hiring freeze is largely responsible for the sluggish economic recovery, but without Scottsdale short term loans, many Arizona businesses cannot afford to expand or make new hires. Bank loans have been few and far between for small businesses throughout Arizona, a part of the vicious cycle of financial dysfunction. Lack of consumer confidence reduces the demand for products and services, which in turn translates into lesser returns for businesses. Lesser returns result in fewer jobs offered, which keeps the cycle of consumer doubt going in perpetuity.

“Businesses don’t see the economy coming back, so they’re not investing,” said senior economist Eugenio Aleman of Wells Fargo Securities. “But lending to business is the key to the economic recovery.”

Underwriting procedures have become more strict

Forced by new federal laws to behave in a more responsible fashion, banks across the U.S. are tackling the stream of defaults and bad loans on the books by following more strict underwriting procedures for small business lending. While some good news has come out of Arizona’s economic climate – corporate borrowing rose by about 1.7 percent in 2010, compared with the previous year – household borrowing has fallen for 10 straight quarters. Even the corporate short term loan increase is below the historical average, reports the Arizona Republic. Banks in Scottsdale and beyond see the short term loan drop as a product of both the downturn in product demand and a lack of creditworthiness for those companies interested in small business lending.

Scottsdale short term business loans, straight from Texas

Many small businesses in Arizona have found that bank loans have not been forthcoming from Arizona banks. Thus, they’ve looked elsewhere. Kent Craven, the Arizona area developer for Sport Clips Haircuts, told the Republic that despite solid growth, franchisees had to obtain short term loans from a Texas bank because Arizona banks wouldn’t sign off. While local lenders were desired, they simply weren’t providing Scottsdale businesses with short term loans.


Arizona Republic1

  1. Arizona Republic