Banks continue to deny loans for small businesses, despite growing demand and increased credit-worthiness

Small businesses continue to struggle to obtain funding for growth strategies as lending requirements at banks remain stringent and the small business lending bill languishes in the Senate. A new survey, though, offers interesting insights on the failed recovery efforts of the past 18 months.

In an interview with BusinessWeek, Pepperdine University associate finance professor John Paglia discussed the results of the bi-annual Pepperdine Private Capital Markets Project.

The study, which surveyed 559 private firms, found that access to capital remains private companies' top concern, despite nearly half reporting that their revenue had increased during the past six months.

Many bankers have claimed that they aren't lending due to low demand, though the survey showed this to be untrue. Of the banks that responded, 72 percent said that the number of loan applications had increased over the past six months, with 55 percent reporting that credit-worthiness was improving, as well.

Loan officers continue to deny funding to small businesses, though. Seventy-two percent of cash flow-based loans were declined, along with 90 percent of real estate-based loans and 46.7 percent of collateral-based loans.

Without access to loans, many businesses have held off on hiring, buying supplies and expansion plans in hopes that Congress will come to their aid and pass the lending bill. If passed, the bill would provide tax breaks and waive loan fees, as well as create a $30 billion lending fund.