Despite uncertainty related to the government shutdown, a good number of small businesses had their eyes on growth in October, according to one lending index.
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Demand for small-business financing increased 13% in October over the 2013 monthly average, according to Direct Capital’s October Small Business Lending Demand Index. This comes on the heels of a 12% climb in September. Year over year, demand is up nearly 25%, according to the index.
Demand for loans from the Portsmouth, N.H. –based small-business lender is at its highest point since January 2012, says Stephen Lankler, Direct Capital’s senior vice president.
“Their confidence is raised: They’re investing in infrastructure and taking opportunities for growth,” says Lankler.
The jump may have had some help from the partial government shutdown, which shutdown the SBA’s loan unit for three weeks. And non-SBA loans could not be processed during the government shutdown because the IRS was closed.
Despite the logjam, Lankler says the October reading is a good indicator for the economy at-large.
“When things aren’t going well, they’re not seeking capital. They’re thinking, ‘How do we get through the next few months?’” says Lankler. “Everything we’re seeing … there is clear investment going on right now to drive the growth of their businesses.”
A Strong Holiday Season for Small Businesses?
Lankler says the fourth quarter is generally strong for small businesses, many of which are gearing up for the holiday season.
“They need capital to buy inventory from vendors to get it on the shelves and they’re hiring, because there’s more business,” says Lankler.
He says loan demand in October also likely saw a boost from the fact that it’s a relatively long month; more business days means more planning.
Despite the Thanksgiving holiday, which takes a bite out of the number of operating days for many businesses in November, Lankler says he expects demand for loans to be up throughout the end of the year.
“On a daily aggregate basis, we expect November to be strong … and demand to be completely on par with demand in October,” says Lankler.