Credit Crunch Easing for Small Businesses

Credit Crunch Easing for Small Businesses
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There may be good news on the horizon for small-business owners in need of loans. A new survey suggests the credit crunch for small businesses may be easing.

Sixteen percent of small-business owners applied for loans or lines of credit in the last year, unchanged from the previous quarter. But of those applicants, 14 percent more had their loans approved than in the previous quarter, according to the fourth-quarter Kauffman/LegalZoom Startup Confidence Index, published Thursday.

"This is a really good sign that credit could be on the rise. That really was a major drag on the economy over the last four years," says Dane Stangler, Kauffman's director of research and policy.

Meanwhile, entrepreneurs continue to take a-glass-is-half-full approach to their profits rising over the next 12 months, even as doubts about the economy's health persist.

Eighty-three percent of startup business owners are confident that their profits will go up within the next 12 months, according to the Kauffman/LegalZoom survey.

Related: Finally, Access to Capital Improving for Small Businesses

This represents a 4 percent rise from the previous survey, conducted in July 2012, and was the highest confidence level expressed by entrepreneurs this year. The survey includes responses from 693 business owners nationwide.

"There is never a bad time to start a business," Stangler says. "There are always problems to solve. There are always opportunities to capitalize on."

Forty-one percent of entrepreneurs reported being very confident in future profitability in the fourth-quarter survey, compared to 39 percent in the third quarter. The number of respondents who were somewhat confident in future profitability rose from 40 percent in the third quarter to 42 percent in the fourth-quarter survey.

Small business owners' expectations for the U.S. economy rebounded from the July 2012 quarterly survey, but it's unclear whether this is a sustainable trend. Concerns about the economy's health continue to fester, particularly as the end of the year approaches. Many people are concerned about the so-called "fiscal cliff" -- the conundrum the U.S.government will face on January 1 when various tax increases and spending cuts kick in -- and the potential it has to drive the fragile U.S. economy back into a recession.

Related: Getting the Big Banks Back into Small-Business Lending

Still for now, 44 percent of startup owners believe the economy will improve over the next 12 months, compared with 32 percent in the third-quarter survey, 38 percent in the second-quarter survey and 38 percent in the first-quarter survey. 

What's more, startups are expecting hiring to increase over the next 12 months, with nearly 40 percent of business owners saying they plan to hire additional employees. This is the highest percentage reported in 2012.

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