First Q Lending Down For Small Business

Based on the call reports from the Fed Deposit Insurance Corp (and the SBA Office Of Advocacy), small business lending has been on the decline since 2008, but better than 2005 and 2006.

In 2008 there was over $711 billion given out to small businesses, in ’09, that number fell to just less than $700 billion. Then again in 2010 that number fell to just over $650 billion in lending to small businesses.

The trend is continuing through the first quarter of 2011. In the first quarter of 2011, bank lending to small businesses fell almost $15 billion.

The problem, the recession. Then banks have been squatting on the cash, and keeping tight restrictions on making loans. The credit crunch not only hurt individuals, but it put a tight grip on small businesses also.

Big banks just want to make safer loans for now, and are continuing to make solid loans to large companies, especially among the largest banks. Even in the aftermath of the bailout ($700 billion given to banks), they continued to enforce strict loan guidelines and just flat out don’t want to make small business loans.

The mid-sized and small banks either increased or kept their lending levels the same to small business. This is important if we want to see recovery from the recession. Small business makes up a lot of the job market. Without lending to them, the jobs in the US will continue to be on the decline or stagnant.

An economist with the SBA Office of Advocacy (Williams), said that part of the problem is that there aren’t as many small business applying for loans. It’s hard to tell how much of this is apart of the decline in lending to small businesses.

Some companies that need financing are now turning to companies like Kiva, who do micro-financing (micro-lending). The United States now has 44 million people living below the poverty line.

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