The Economy

Small Businesses Left Out of Lending Spree

The amount of small business loans held on banks' books is stagnating and is still 18% below the peak dollar volume, which occurred in 2008.
Iris DorbianAugust 19, 2014
Small Businesses Left Out of Lending Spree

Small business lending is still below its pre-recession levels, according to the Federal Deposit Insurance Corp. Although banks held $585 billion in small business loans on their books at the end of the first quarter, up 1% versus last September, small business loans were still off 18% from their peak of $711 billion in 2008, says the Wall Street Journal.

shopThe news outlet says small business bank loans of $1 million or less are also down about 14%, to $23.5 million, since 2008. And PayNet, a provider of small business credit risk management solutions, says that in “nearly one-third of all U.S. counties, small-business lending remains below 2005 levels.”

The  slow rebound in small business lending does not extend to medium and large companies. Citing Federal Reserve data, WSJ notes that loans to all-size businesses hit $2.48 trillion as of March 31, a 9% increase since 2008. Further, according to the survey of senior loan officers, “banks have loosened standards more quickly for medium and large companies than for small ones.”

But there is one positive development for small businesses seeking loans. Pointing to a study conducted by Moody Analytics, WSJ says there’s been an increase of small banks issuing loans to businesses. Moody’s says that the overall number of commercial and industrial loans administered by small banks in July jumped  11% compared with the year-earlier period. Small banks usually focus lending efforts on the small business market.

To compensate for the lack of bank credit, WSJ says that some small business owners are dipping into retirement savings or turning to friends and family for their financing needs. Others are seeking out “high-cost, short-term” alternative lenders.

Source: WSJ Small-Business Lending Is Slow to Recover

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