Small Business Owners Are not Indicating a Credit Crunch, Despite New York Times Trend Story

Like you, I don't like to read news articles that clearly display the reporter did not let something as inconvenient as facts get in the way of their trend story. For example, yesterday The New York Times ran a trend story with the alarming headline, "Worried Banks Sharply Reduce Business Loans." Wow, that's a scary headline. I know it scared me. As editor of MyBusiness magazine, I was scared that we'd totally missed a major story--banks are sharply reducing business loans and we missed it? But wait, I reassured myself, we have access to continuous research from NFIB measuring small business owners' experiences in trying to access capital and our latest numbers show that, while owners are clearly not optimistic about the economy, they are not yet indicating the credit crunch being reported in The Times.

Here's a sampling of The New York Times' lede:

"Banks struggling to recover from multibillion-dollar losses on real estate are curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring....The scarcity of credit has intensified the strains on the economy by withholding capital from many companies, just as joblessness grows and consumers pull back from spending in the face of high gas prices, plummeting home values and mounting debt."

The story focuses on an anecdote involving Wachovia Bank turning down a business loan for the purchase of a robot--implying that a rigid business loan market was the cause and that this is part of a greater trend. I was about to start tracking down why the research we track was so out-of-sync with the Times story, when I read this nugget in the story:

"Still, Wachovia’s commercial and industrial loans grew by 13 percent in June compared with the prior year..."

In other words, The New York Times article contains facts that clearly refute the story's headline and lede--but they didn't let that get in the way of a good trend story.

For the record, small business owners are not very optimistic these days, but access to capital is not yet showing up as a major concern in the longest-running continuous survey of small business owner optimism, NFIB's Small Business Economic Trends survey. The current monthly survey reveals the following:

"The net percent of owners reporting loans harder to get in recent months fell one point to a net 7 percent (8 percent said "harder," 1 percent said "easier"). The average reading since September's surprise Fed rate hike is 7 percent. Only 2 percent of the owners cited the cost and availability of credit as their No. 1 business problem (down 1 point), far from the record 37 percent reached in 1982. Thirty-five percent reported all their borrowing needs met (up one point) compared to 5 percent who reported problems obtaining desired financing (down two points), a three-point improvement in the net percent reporting all needs met. The remainder did not want to borrow.

So, to sum things up, The New York Times today reported that "worried banks are sharply reducing business loans," while the most current survey of small business owners reports that, compared to previous recessionary times, concern about access to capital is actually falling. Of course, this could change next month--and it likely will, if people start believing what they read in headlines of The Times.