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Banks Vow to Do Better at Small Business Lending in 2010

SBA Loan Enticements Extended--For NowA Treasury report released on December 15, 2009 showed that major banks decreased their business loan balances by $1 billion in October, CNNMoney.com [1] says.

Starting in April, the 22 banks that received TARP funds as part of the federal government’s bank bailout had to start filing monthly reports with the Treasury Department. Since then, total small-business lending by the banks declined by 11.6 percent.

The report came out a day after President Obama met with leaders of some of the nation’s biggest banks to urge them to increase lending.  President Obama had another banker gathering on December 22, to host a discussion with representatives of several community banks.

There are some signs that banks are responding to the pressure. After decreasing its small-business loan balance every month since April, Bank of America announced last week that it plans to loan $5 billion more in 2010 than in 2009.

Wells Fargo has also declared it will increase small-business lending by 25 percent compared to 2009. Although its lending has declined by 4 percent since April, Wells Fargo still makes more small-business loans than any other bank. Wells Fargo has pledged to increase overall lending by 25 percent in 2010 compared to 2009. Marc Bernstein, head of Wells Fargo’s small-business unit, says the bank is optimistic that the economy will pick up in 2010 and that there will be more creditworthy small businesses to loan money to.

JPMorgan Chase said in November that it would increase small-business lending by as much as $4 billion in 2010; it also has a new line of small-business credit cards, Ink, that could account for much of that amount. Chase has also announced plans to hire some 325 small-business specialists to find new small-business customers and work with existing customers.

The Wall Street Journal [2] also reports that banks including US Bancorp and JP Morgan Chase have promised they will take second looks at small-business loan applications that were previously rejected.  Bank of America and Wells Fargo, which already had “second-look” programs in place for most of 2009, are expanding those programs, hiring more staff and creating formal appeals processes.