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Small Business Lending Shows Signs of Stabilizing

March 2nd, 2011 ::


By Rieva Lesonsky

While it’s not news that small business lending was down in 2009-2010 compared to its peak in 2008, the good news is that small business lending began to stabilize during that time period, according to the Office of Advocacy’s latest edition of Small Business Lending in the United States.

Although lending to small firms by U.S. financial institutions continued to decline in 2009-2010 period, it did not decline as much as lending to large companies. Lending to small firms dropped by 6.2 percent, but large firm lending declined by 8.9 percent in the same time period.

In terms of the smallest business loans (those under $100,000), loans to small firms began to stabilize in 2009-2010. The total was down by 1 percent during that time, compared with a 5.5 percent drop in 2008-2009, and real estate loans accounted for the entire decline.

“Businesses and lenders continued to exercise caution in borrowing and lending through 2009-2010,” said Chief Counsel for Advocacy Winslow Sargeant.  “As the economy improves, this study, through its state-by-state display of lender performance, can help both small business borrowers and lending institutions see where small firms are beginning to find the capital they need.”

One surprising finding from the study is that small businesses are relying more heavily than in the past on bigger lenders. “Lenders with total assets of $50 billion or more have continued to increase their market share of small business lending,” the report notes. “In 2010, the 34 megalenders held 39 percent of the small business loans outstanding.”

With the GDP on the rise, the Office of Advocacy’s report predicts business lending may follow the pattern of other recessions, in which business lending didn’t really start to expand until recovery was well under way.

Small Business Lending in the United States, 2009-2010, uses data that financial institutions report to their regulatory agencies to compile state-by-state rankings of their small business lending.

Image Courtesy: Karen Axelton

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