SBA Report: Small Biz Lending Has Not Recovered

January 24, 2018

Recently, the U.S. Small Business Administration (SBA) Office of Advocacy released a report detailing how small-business access to capital has changed since the financial crisis. The report, “How Did Bank Lending to Small Business in the United States Fare After the Financial Crisis?” by Rebel A. Cole, follows-up on a 2012 report which showed bank credit dropped significantly in 2009-2011, immediately following the financial crisis.

According to the new report, small banks appear to have been leaders in small-business lending. In the lead-up to the financial crisis, business loans—for both large and small businesses—grew at double-digit rates, with small-business loan growth from small banks double that found at large banks. Furthermore, large-bank business loans declined at a greater rate than at small banks, and after the financial crisis, small-business lending grew much faster at small banks than at large banks.

Unfortunately, despite the work of these smaller banks, small-business lending is far from recovered. New small-business loans were cut in half during the financial crisis, and “has seen only a very limited recovery post-crisis, leaving small business loan originations down 40 percent from pre-crisis levels.” The report goes on to say that the data shows very modest recovery in the small-business loan market while total business loans has experienced a more robust recovery, ed by the large-business loan market.

The report urges policymakers to take several NSBA-supported regulatory and legislative steps to remedy the situation, including: encourage large banks to increase their small-business lending; encourage the formation of more community banks; grow non-bank lending options such as credit-union loans and thereby increase business lending limits on credit unions; and limiting the concentration of the banking sector.

Please click here to download the report summary.