Iron Capital Equities, which owns Line of Credit Depot (lineofcreditdepot.com), sees that more local businesses may need bank debt financing. Iron Capital Equities have seen that the increase in loan applications has spiked 67% in the past 90 days. The need for business capital is high due to inflation, supply chain issues and rising wages.
Since the SBA EIDL loan program, part of Covid financial relief, has ended for good, businesses will be turning to bank loans and lines of credit. About the 'use of funds', businesses are general in their reason, 'working capital'. This could mean that the funds will be used for reserve cash and to afford higher costs of goods and services.
"We are seeing a huge increase in loan applications from business owners, mostly all applying have never looked for business credit in the past", says Matthew Elling, CEO of Iron Capital Equities. "The struggle to find affordable small business credit is real. A Lot of online lenders have higher than expected fees, so businesses are coming to us for lines of credit, which are issued by small business friendly local and national banks."
This uptick in small business credit needs has been shown elsewhere, such as from the US Chamber of Commerce and Goldman Sachs. In a recent survey by the US Chamber of Commerce, 45% of business owners have taken out a loan to manage higher costs caused by inflation. A Goldman Sachs survey recently found that 48% of small business owners who said inflation was their biggest concern have less than three months of cash reserves on hand.
As inflation increases, the higher-than-expected costs of consumer goods and services could be even more exacerbated by the developing conflict between Russia and Ukraine. Although businesses usually pass the price increase along to customers, the business still needs to pay more on their end, thus the need for more working capital.