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During the Recession, the relationship between growth businesses and lenders faltered. Now that small businesses are getting stronger, lenders are taking a second look.
Since 2009, banks have gradually become more open-minded when it comes to lending to small businesses. As credit risk diminishes, big banks are starting to reevaluate their relationships with small businesses, and finding that these smaller firms may finally be able to repay their loans again. However, small business loans are still on the decline.
Why has the lending between big banks and small businesses not yet had a revival? The consolidation of banks, their desire for profitability, and pending regulations are all partially to blame. On the bright side, community banks and alternative lending sources, such as firms that match small businesses with lenders, have allowed small businesses to stay afloat. Despite increasing financial stability, lenders must remain cautious, especially when lending to small businesses. Lenders must continue to demand transparency from their potential borrowers, and should look at cash flow, collateral, the business owner, and the business plan, before giving them the credit.
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