Small business owners received some good news this week as it was reported that lending to them has increased for the first time in 10 quarters.
According to a report at Inc.com, the U.S. Small Business Administration released its quarterly report this week showing the loans to small businesses have increased for the first time in more than two years, a potential sign that some companies are coming out of the economic recession.
Overall, lending to small businesses increased by four-tenths (0.4) of a percent, from $584.1 billion in September last year to $586 billion by the end of 2012. Less restrictive standards for commercial and industrial (C&I) loans led to the increase in lending to small businesses. Commercial real estate (CRE) lending continued to lag, according to data from the Small Business Administration report. Demand for both loans continues to be high, a sign that businesses are recovering from previous economic downturns.
The SBA report notes that loans in all size categories (under $1 million, between $100,000 and $1 million, and under $100,000) all saw increases during the final quarter of last year. Big banks lent more to small businesses than smaller financial institutions and the gains in big bank loans offset the declines realized among smaller banks.
We reported last year on this trend, with bigger financial institutions lending more to small businesses even as loans from smaller banks were approved less often. Big banks have been criticized in the past for not lending to smaller businesses. According to the SBA report:
“Larger institutions of $1 billion or more helped offset the declines in lending by the smaller lending depository institutions. Small business lending by institutions with assets of $50 billion or more followed the general trend and remained unchanged.”
Wells Fargo loaned the most money to small businesses last year, according to Inc.com’s data.
The bank loaned $32.8 billion through 664,542 loans. Bank of America ($26.2 billion), JPMorgan Chase ($19.8 billion), American Express Bank ($16.9 billion), U.S. Bank ($13.8), PNC Bank ($9.9 billion), Branch Banking and Trust Co. ($9.1 billion), Citibank ($9.1 billion), Regions Banks ($6.9 billion), and TD Bank ($6 billion) rounded out the top 10 banks lending to small businesses, based on data provided by SNL Financial Services.
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The article is great news for small business owners who are seeking capital. However, the article leaves out non-bank commercial finance companies, which have steadily increased their lending since the recession. Non-bank asset based lenders and factors do not require restrictive covenants like banks and have experience lending to businesses with operational and financial problems that may be out of favor with banks or businesses that experience rapid growth and yet do not qualify for traditional bank line. Business owners need to know that ready and stable capital is available. Good sources to find such lenders are the Commercial Finance Association (cfa.com) and International factoring association (Factoring.org) both are reputable trade associations for asset based lenders and factors.
– Einat Steklov
Mel @ Capiota
Over here in the UK the news is very different – lending from the banks is down and a lack of demand is apparently to blame. I do not think this is the case as alternative finance providers have largely seen an increase in demand! Hopefully this country will see promising figures like the US soon.