Anita Campbell recently blogged in this space that the government’s efforts to spur small business lending have largely fallen flat. Last year I blogged here about how big banks including Wells Fargo, Bank of America and JP Morgan Chase were pledging to lend more money to small businesses in 2010. Have the banks come through on their promises?
Bloomberg Businessweek recently reported on the progress banks made for the first quarter of 2010. Reporter John Tozzi writes that assessing small business lending is difficult because at most banks, lending to small businesses can fall into several categories-from real estate to credit cards-and because banks typically don’t break out separate numbers for small businesses.
• Wells Fargo made $2.9 billion in new loans to small businesses. The bank’s total goal for 2010 was to lend $16 billion to companies with under $20 million in revenue. The $2.9 billion brings it to 18 percent of that $16 billion goal, which is an increase from the $13 billion in loans Wells Fargo made to small companies in 2009. A spokesperson says Wells Fargo hopes to reach the goal by the end of the year.
• JPMorgan Chase made new loans of $2.1 billion to small businesses. That’s 21 percent of its goal to make $10 billion in new loans to companies with under $20 million in revenue. The goal is an increase from $6 billion in 2009. A Chase spokeperson says first-quarter lending to small businesses is up 31 percent compared to the first quarter of 2009. Since announcing its new goals in late 2009, Chase has hired 235 new small-business bankers and made $110 million in “second-look loans”–loans to small-business borrowers whose applications were turned down at first, but got a second review.
• Bank of America made new loans of $3.4 billion to small companies. The bank also made $16 billion in loans to midsized companies (those with revenues under $50 million). Bank of America vowed in late 2009 to increase lending to small and midsize businesses by $5 billion in 2010. Since the bank hasn’t released comparable numbers for 2009, no comparison can be made in terms of growth or what kind of improvement these loans represent.
Given the current state of the slowly improving economy, these numbers seem fairly promising.
Thanks for giving the Small Business Trends community some data about who’s loaning money, and how close they are to their goals.
I disagree with you on one thing, though. You said that “given the current state of the slowly improving economy, these numbers seem fairly promising.”
I think that given the state of our economy, these numbers are weak, at best. The banks mentioned don’t seem to be stepping up to the plate at all.
They obviously don’t have to yet. When they need the interest income, they’ll start loaning money. (That, plus they still need to dump more bad paper they’re still probably holding, from 2 years ago.)
I’m The Franchise King
I appreciate the optimism, but I’m with Joel in saying that with the year over 50% gone, 21% and 18% seem like they’re way behind schedule and probably will come up far short of their goals.
Rieva: Do you think it is the government’s job to “spur small business lending”?
I recommend you to study BB&T as great case on how to stand up for the rights of business owners and a free market.
“Former BB&T chairman: Less regulation would be better”
I'm just Here
I personally allocate funds for small businesses and can tell you through (only) my own (humble and slightly jaded) experiences that these banks are not trying t promote the growth of nearly enough small business. They only lend to “safe” industries, and then you have to pry the money out of their stone-cold hands. These banks treat this money as if they own it, when in factthey are a SERVICER of MANY CLIENTS who make up a whole network of borrowers and lenders. Thesebanks are only giving moey back that they have already gained, and even thenthey are STINGY. It is no wonder people are still still stuffing their mattresses with Ben Franklin’s in this country! We ALLOW tese banks to PROFIT RIDICULOUS AMOUJNTS OF MONEY BY INVESTING IN WAYS WE MAY NEVER EVEN IMAGINE! What happened to the days when banks held your money and returned it with great service and a friendly smile? Thes companies are too big and more coop and Credit Unions need to be developed and FAST. Please… help the american people”?????!? Buy up our resources piece by piece and steal our money and then tell us it is free enterprise on a beautiful unregulated market?!? This is terroris right here on our own soil. They buy and sell us every day!. These banks are NOT going to meet their goals,for if they do they chance oter business making money they feel they are enttled to.
Politically based reporting like this is not in the best interests of small business, but for the purposes of torturing statistics to make a political point. Measuring these companies against their own goals says nothing about how difficult it is to get a loan, but even in doing so, the author can only muster an unwarranted “fairly promising.”
All the respondents above know there is nothing “promising” or even “fairly promising” about what banks are doing.
Here are some non-politically based facts:
Business Week report from yesterday, Aug 5, 2010: “Small Business Lending: The Squeeze Goes On”http://bit.ly/bvGj8H says:
“Bank data show that small businesses, which normally seek loans of less than $1 million, are still having trouble getting credit. For small companies, total outstanding credit dropped to $663 billion in the first quarter of 2010 from nearly $700 billion in mid-2008″
Under pressure from Washington last year, Bank of America, Wells Fargo (WFC), JPMorgan Chase (JPM), and Huntington National Bank (HBAN)… set specific  targets. At the current pace it looks as if only Bank of America is on track to meet its goal.”
Chase, which Rieva’s blog touts as having increased it’s goal from $6billion in 2009 to $10 billion in 2011, ignores that fact that Chase’s small business lending evaporated in 2009 – down -70% from 2008 http://bit.ly/SvwPE. Their 2010 goal is nowhere near their lending of 2008 and they aren’t even on pace to hit the 2010 goal.
Headline from three days ago, Aug 3, 2010:
“Wells Fargo/Gallup Small Business Index Hits Record Low, Future Expectations Dip Below Zero First Time Ever” http://bit.ly/bvvyuR
This report goes on to say:
The Wells Fargo/Gallup Small Business Index — which measures small-business owners’ perceptions of six measures of their current operating environment and future expectations — fell 17 points to -28 in July. This is its lowest level since the index’s inception in August 2003.
Record Pessimism in Future Expectations
Most of the decline in the overall index came in the Future Expectations Dimension of the index, which measures small-business owners’ expectations for their companies’ revenues, cash flows, capital spending, number of new jobs, and EASE OF OBTAINING CREDIT” [my emphasis].
Forty-two percent expect it to be “somewhat” or “very difficult” to obtain credit — no improvement from April and January. One in five (22%) small-business owners expect their companies’ financial situations a year from now to be “somewhat” or “very bad.””
If you want to divert attention from the facts for political purposes, it’s always easy to find a few statistics that can be tortured to support your position, but it’s never easy to hide from the avalanche of real facts that expose such torturing.
The non-political fact is that the Bush and Obama administrations gave $1.5 trillion of our money (yours and mine) to their big business, and big bank cronies and true small businesses under 20 employees, which comprises 99.7% of ALL businesses, has seen almost none of that money.
The non-political fact is that the number one hiring source is businesses under 10 employees and #2 is businesses from 11-20 employees. Yet the only thing they have gotten out of these bailouts is
1) temporary hiring incentives and tax cuts that work great for companies over 100 employees who were going to hire anyway,
2) an increased health care burden that no one can yet understand,
3) more paper work (we now get to send in a 1099 for any expense over $600)
4) and the likelihood of the greatest tax increase in American history when the present tax cuts expire in a few months.
This administration has focused on every pet ideological agenda it came in with, but in doing so has ignored small business and for the most part, the economy as a whole. The real world has definitely gotten in the way of them creating Utopia.
Everyone I know tells me I’m one of the most optimistic people they know, but please tell me what part of all this is “fairly promising”?