Banks Commit to Increase Lending

September 21, 2011

The administration on Tuesday announced a new initiative to increase small-business lending. The announcement was made by Vice President Joe Biden and U.S. Small Business Administration (SBA) Administrator Karen Mills in Ohio where they announced commitments by 13 private lenders, including many of the largest banks in the country, to increase lending for small businesses by a combined $20 billion over the next three years.

This new commitment represents an increase of 10% or more beyond the current levels of lending at many of the participating banks. This announcement comes on the heels of SBA’s announcement last week that they have approved more than $18 billion in 7(a) and Arc loans this year. Comparatively, SBA lent 12.4 billion in FY 2010.

Despite SBA lending gains, small businesses continue to report tightened lending and an inability to garner adequate financing. According to NSBA’s Mid-Year Economic Report, The number of small-business owners who report being able to obtain adequate financing for their business remains unchanged from six months ago at 64 percent. This means that more than one-third (36 percent) of small-business owners cannot get adequate financing. Among small-business owners for whom capital availability has been a problem, 36 percent have been unable to expand the business and 18 percent have been forced to reduce their number of employees.

Ten percent of small businesses report being unable to increase inventory to meet demand and 18 percent said they were unable to finance increased sales, meaning that a lack of capital is hampering growth opportunities. NSBA is pleased to see the various banks coming to the table with such a proposal to try and begin addressing the long-standing problem of the small-business credit crunch.