Business

Small businesses gun shy on loans

The credit crunch is a big illusion — there are just not enough borrowers.

A scathing new report critical of the Fed’s massive quantitative easing program shows banks are crying out for small-business owners to borrow, and billions of dollars are up for grabs.

But there’s an unprecedented shortage of takers, and it’s not, as one might expect, because of restrictive lending standards.

Rather, the dearth is due to the fact that many qualified borrowers are stuck in a Depression-style mind-set, seeing no real opportunity for sales growth and job creation in this lukewarm recovery.

“We should be doing $4 million in loans every month, and instead we’re doing $2 million,” Bill Dunkelberg, chairman of the small-town Liberty Bell Bank in Marlton, NJ, told The Post.

Liberty serves mom-and-pop entrepreneurs. These are the same small business owners who account for half of US private-sector employment and about two-thirds of net new jobs generated in the US in the past 17 years, according to the Small Business Administration.

The typical loan at Liberty is about $250,000. But that loan business has sharply contracted, despite ample Fed funding.

“We have the money to make the loans . . . but we don’t have the applicants,” said Dunkelberg, who co-authored the controversial report in his separate role as chief economist for the National Federation of Independent Business (NFIB).

The NFIB report, in essence, says Fed policy is rigged against small-business owners and all but the largest banks.

The numbers show that, as loans to large American firms are recovering to their pre-crisis peak, the same can’t be said for small firms. They’ve seen their loans steadily decline into late last year before showing some recent signs — albeit tepid — of improvement.

“Even during the so-called ‘credit crunch’ period, when asked what the most important problem facing their business was, no more than 5 percent of small-business owners cited ‘finance and interest rates’ as their top problem,” according to the report by Dunkelberg and his NFIB colleague Michael J. Chow.

So what’s holding them back? “The economy isn’t really cooperating,” Paul Merski, chief economist at the Independent Community Bankers of America, said. “We need stronger economic growth to bring back more robust loan activity. Businesses are still uncertain about their own economic future.”

Tepid consumer spending, which accounts for 70 percent of US economic activity, hasn’t returned to the more positive trend prior to the 2008 meltdown, despite the Fed’s attempts to inflate the economy with $85 billion in monthly bond purchases. “That’s really the difference of trillions of dollars in economic activity over five years,” said Merski of today’s weak consumer spending.

“Business owners will start coming back to borrow more once the environment improves,” agrees Rohit Arora, chief executive of Biz2Credit, a small-business online credit marketplace.