Since the end of the recession in mid-2009, improvement in the small business sector has been slow to appear. Recently, however, signs of renewed optimism have emerged within the sector. The Wells Fargo/Gallup Small Business Index sits at the highest level since early 2008, while the NFIB small business optimism index has broken out of the persistent range of the past three years. With sales and views of the economy more broadly improving, small businesses have showed renewed interest in expanding, increasing capital spending and adding to inventories over the past year.
Assisting them in doing so has been a nascent recovery in small business credit. Bank lending to small businesses has been slower to recover than total bank loans since the past recession, but has now been growing for more than a year. The turnaround has been supported by the improving health of the small bank sector, easier credit standards and a pickup in demand. However, technological innovation has also spurred new avenues for small businesses to access credit outside of the traditional banking sector—but often at a price. The rise in alternative loan sources suggests bank data on small business loans may understate the availability of small business credit.
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