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.
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.”
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