The Current State of Small Business Lending

How did small business lending fare last year? The SBA’s Office of Advocacy recently released its annual report on small business lending, Small Business Lending in the United States 2010-2011.

money abstract

As might be expected, the report found that both small business borrowers and lenders were less active in 2011 than in 2010, with both sides cautious about either taking on debt or extending capital in a still-shaky economy.

This report’s data are based on the size of the loan, not the size of the business, so it defines “small business loans” as those under $1 million. Within that number, loans are further broken down into “macro business loans” (between $100,000 and $1 million) and “micro business loans” (under $100,000).

Here’s what the SBA found:

  • Larger loans grew while smaller loans fell. Business loans of over $1 million grew by 5.8 percent in 2011 in terms of dollar volume. This is a big change from the 8.9 percent drop such loans saw in 2010.
  • By comparison, outstanding small business loans as of June 2011 were valued at $606.9 billion, a decline of 6.9 percent from the same time the previous year.
  • Borrowing declined for both commercial real estate (CRE) and commercial and industrial (C&I) loans under $1 million. However, CRE loans declined at a slower rate.
  • The value of the smallest C&I business loans (micro loans less than $100,000) declined by 12.7 percent.
  • The largest banks (those with assets of $50 billion or more) accounted for 38 percent of outstanding small business loans and 51 percent of the total decline in small business loans.

While the SBA study reflects what was happening last year, the Thomson Reuters PayNet Small Business Lending Index for June paints a more optimistic picture. That index shows small business borrowing at its highest level of the year, what Thomson Reuters president William Phelan calls in this Reuters video one of the most dramatic jumps since they began tracking the data in 2005. Phelan says:

“Transportation, construction and professional services companies are starting to expand and invest in their businesses again.”

Phelan attributes the surge to small businesses having learned how to do more with less. They’ve adjusted to new economic reality by becoming more productive and investing in new technology, he says.

As a result, small businesses are in good financial shape and loan delinquencies are down to an all-time low. Phelan explains:

“Small businesses have spent a lot of time strengthening their balance sheets and are well-positioned to start to expand when the economy starts growing again.”

Is your business ready to borrow?

Money Photo via Shutterstock


Rieva Lesonsky Rieva Lesonsky is a Columnist for Small Business Trends covering employment, retail trends and women in business. She is CEO of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Visit her blog, SmallBizDaily, to get the scoop on business trends and free TrendCast reports.

6 Reactions
  1. Comparing small business lending today to what it was in January is like saying someone who wasted away from 185 lbs to 100lbs is healthy because they are up to 105lbs. How about we compare it to what it was in 2006, 2007 and 2008 before the crash?

    And those big banks that account for 51% of the total decline in small business lending own 85% of the market. They were bailed out for being “too big to fail”, and today they are MUCH bigger than when they were bailed out and Dodd-Frank was put in place to supposedly stop their growth.

    And let’s not forget that every big bank pulled tens of millions of standing business credit lines from small businesses across America in 2009 and 2010 without even looking at their credit-worthiness, so the banks could look better on paper.

    When are small business owners going to realize that no one in Washington’s big government and no one in these corporate big businesses are the least little bit interested in their survival, let alone their success? This is the most anti-small business climate we have ever seen in America, and both the giant government and giant banks are in the middle of it. It will come home to roost – we won’t forget.

    • I agree whole hardly, I have been trying to get funding to expand my small business in the Micro loan amount area for 6 months, keep getting the run around. I used my credit cards to fund my business when all this economy and the war stuff started back in 2004. Now I am at a place I want to build Business Credit and get some of the High Interest Rates ( which apparently the interest rates that Credit Card Companies can charge is not an issue, it is for me, when it is almost 25 -28 points over the prime rate which is preditory, but that was not part of the credit card reform… and that will be for another story.) Talked and sent out paperwork for funding for the past 2 months. Driving me nuts, that I have worked building my company for the past 10 years and when I ask for help because the economical downturn, less traffic/clients. I can get no where….

  2. Any professional in the area of risk should be concerned and should protest the discrimination against entrepreneurs and small businesses, with respect to access to bank credit, and which was introduced over the last decade by those regulations that have now delivered us “The castrated economy”.

  3. Thank you for the information in this article. It paints a sunnier picture than I would have otherwise imagined, which is somewhat refreshing. I hope that more small businesses can recover from this shaken economy.

  4. Thanks Suzy. I hope so too