NEW YORK (AP) — Small businesses still have the pandemic and now high inflation to grapple with — and they're finding it's tough to get a loan to help with the daily grind.

A recently released survey from the Federal Reserve shows how the pandemic has altered the financial landscape for small business. About 85% experienced financial difficulties in 2021, up nearly 20 percentage points from 2019. Back then, more than half of owners who sought a loan were looking to expand; last year, the majority of applicants needed funds just to cover every day operating expenses.

Meanwhile, inflation is the highest in decades, with raw materials and finished goods soaring in price and workers demanding higher wages. The Federal Reserve is raising interest rates in response, which means the cost of borrowing money is going up.

Even in normal times, it can be tough for small businesses to get loans from traditional banks because they lack the assets and credit histories of bigger companies. During the pandemic, banks have been stingier, outside of COVID-related programs. Two years in, loan applicants are more likely to get turned down or to receive less money than they asked for compared to before COVID-19.

When the building she leased in went up for sale, Letha Pugh knew she would need to relocate her business. So, she decided to buy and renovate her own building.

Pugh, co-founder of Bake Me Happy, a gluten-free bakery in Columbus, Ohio, applied for a Small Business Administration loan last July. But the process, involving a Community Development Financial Institution and a local bank, First Merchants Bank, dragged on.

Pugh worried that another buyer would swoop in with cash and buy the building she was under contract for. Finally, in January, she got approval for a loan of $780,000.

While Pugh is glad everything worked out, the episode shows how difficult and stressful it can be for a small business to get financing.

"One night I got off the phone and just started bawling because I was so frustrated, all of these things were happening, not because of me, but because of the bureaucracy and red tape," she said.

Only about 30% of businesses that applied for financing last year got the full amount that they asked for, down from about half in 2019. Firms owned by people of color, firms with fewer employees, and leisure and hospitality firms were least likely to receive the full amount of financing sought. About 68% of applicants got some of the amount they applied for, down from 83% in 2019 and 76% in 2020.

Original article: https://scnow.com/business/small-businesses-needing-loans-find-banks-stingy/article_34139d7e-b427-11ec-aa83-6bcc568bacf1.html