Survey: Small business demand for loans still weak

NEW YORK (AP) — Small business owners show little appetite for borrowing cash, and many say the gridlock in Washington is to blame.

That's the finding of a survey released Wednesday by researchers at Pepperdine University and Dun & Bradstreet Credibility Corp. Small businesses have been wary of taking on debt because of continued uncertainty about the economy and how the new health care law will affect their costs. Those issues have been compounded by political stalemates in Congress. The inability of lawmakers to work together is hurting companies' ability to hire more workers, said 62 percent of those surveyed. Nearly half said they have no plans to hire in the next six months.

The survey was taken between Jan. 14 and Feb. 1, after Congress agreed to raise taxes on high-earners only and delayed $85 billion in budget cuts for two months. But the political wrangling that eventually averted the so-called "fiscal cliff" lasted until the final day of 2012, and that uncertainty kept many business owners on the sidelines in the final months of the year. The survey found that only 26 percent of small businesses, defined as those with less than $5 million in revenue, tried to raise cash toward the end of 2012. That's far below the 38 percent who had sought financing during the latter half of 2011. And those that did seek out financing found it only slightly easier to get: 73 percent of small businesses called loans still difficult to get, compared with 78 percent who struggled a year earlier.

Even with the tax issue settled, only a quarter of those small businesses surveyed plan to borrow money in the next six months. That's down from 27 percent at the start of 2012. And 57 percent don't plan to seek any financing in the first half of this year, up from 49 percent a year earlier. One reason cited by many companies for not borrowing is they have enough cash on hand. More than half — 51 percent — said their cash flow was sufficient.

The survey was based on responses from more than 2,700 businesses from Dun & Bradstreet Credibility Corp.'s database of companies. The survey was conducted by Pepperdine's Graziadio School of Business. Dun & Bradstreet Credibility Corp. provides credit ratings on small businesses.

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