Advocacy Releases Small Business Lending Report

January 14, 2015

pic-money-collageRecently, the U.S. Small Business Administration’s (SBA) Office of Advocacy released a report entitled, “Small Business Lending in the United States 2013.” This study examines the supply of credit extended to small businesses, analyzes the changes in the market structure of small business credit, and it ranks lenders according to the amount and proportion of small, micro, and macro business loans in their portfolios.

The report was based on data collected from the Consolidated Reports of Condition and Income (Call Reports) and Community Reinvestment Act (CRA) reports from 2008 to 2013.The report covers all federal insured depository lending institutions (savings banks, cooperative banks, savings and loan associations, and commercial banks) with the exception of credit unions and foreign banks.

While in recent years some economic indicators, such as Gross Domestic Product (GDP) and unemployment, have shown signs of improvement, recovery for the small business credit market has been slow and is currently at 2002 levels. According to Advocacy, for the first time since 2008 both the number and value of small-business loans showed parallel growth at the end of 2013. The data shows that the decline in outstanding loans stabilized in June 2013 and then turned upward by the end of the year. In recent years, lenders have reported easing their credit standards on commercial and industrial loans, which may have contributed this improvement.

Furthermore, it was reported that the largest banks and bank holding companies continue to hold the largest share of the small business loan market, but for the last five years their share has been somewhat stagnant. This report suggests that small business bank borrowing has remained weak compared to large businesses. In fact, it notes that since the financial crisis, the total share of small-business loans in banks’ overall loan portfolios has been steadily declining for over a decade.

Some highlights of the report include:

Small Business Lending by All Banks

  • The growth of small business borrowing has been uneven since the Great Recession. Small business loans outstanding amounted to $585 billion in June 2013. They were down less than half a percent from their June 2012 level, and by the end of 2013 both the number and value of small business loans increased concurrently.
  • The value of small ($1 million or less) and macro business loans (between $100,000 and $1 million) rose by 0.4 percent and 0.1 percent respectively. The value of micro business loans (under $100,000) increased by 2.0 percent or $2.2 billion by year-end 2013.
  • The total number of lenders submitting Call Reports declined to 6,939 in June 2013 from 7,246 in June 2012. The decline consisted almost entirely of the smallest lenders, those with assets under $100 million.
  • In general, the pace of total business lending and large business lending slowed from the previous year. Total business loans outstanding increased 6.7 percent to $2.6 trillion in June 2013, compared with an 8.0 percent increase the previous year. Large busi­ness loans increased by 8.9 percent compared to 12.0 percent in June 2012.

Lending by Multibillion-dollar Lenders and Bank Holding Companies

  • Small business lending continues to be highly concentrated in the largest banks and bank holding companies.  The lending industry is made up of over 6,000 banks, yet the 35 largest bank holding com­panies held 39 percent of all small business loans outstanding in June 2013 ($227.3 billion of the total $585 billion in small business loans outstanding). By the end of the year, these 35 banks accounted for $233.8 billion worth of small business loans.
  • Total lending is even more heavily concen­trated. Large lenders (with assets exceeding $10 bil­lion) held roughly 79 percent of total industry assets. Within this category, mega lenders (with more than $50 billion in assets), held almost 70 percent of the industry’s total assets.

The study also ranked the small business loans outstanding of the 91 largest lenders with total domestic assets of more than $10 billion. Each lender’s ranking was based on four variables: ratio of small business loans to total assets; ratio of small business loans to total business loans; the amount of small business lending by the lender;  and the total number of small business loans.

The top five small business lenders in June 2013, based on Call Report data, were:

Small Business Lending (loans of $1 million or less)

  • American Express Co. (first in 2012)
  • First Citizen Bancshares (second in 2012)
  • Wintrust Financial Corp. (third in 2012)
  • Zions Bancorp (fourth in 2012)
  • Synovus Financial Corp. (fifth in 2012)

Micro Business Lending (loans of less than $100,000)

  • American Express Co. (first in 2012)
  • GE Capital Retail Bank (third in 2012)
  • Capital One Financial Corp. (second in 2012)
  • JPMorgan Chase & Co. (fourth in 2012)
  • Wintrust Financial Corp. (fifth in 2012)

Macro Business Lending (loans of $100,000 to $1 million)

  • Synovus Financial Corp. (tied for second place with Zions Bancorporation in 2012)
  • Zions Bancorporation (second in 2012)
  • First Citizens Bancshares Inc. (first in 2012)
  • Wintrust Financial Corp (fifth in 2012)
  • TCF Financial Corp. (tied for 11th place Huntington Banchares in 2012)

A list of lenders by state is available on Advocacy’s Lending Study webpage.

For the full report click here and research summary click here.