Searching for Capital

A broker assesses the small-business lending market.

Earlier this month, I published a post entitled, “Are the Big Banks Keeping Their Commitment to Small Businesses?” It had to do with a commitment that 13 of the largest banks in the country made last September to increase their small-business lending by $20 billion over the following three years.

Before writing that post, I spoke with executives from three of the largest banks on the list, the Small Business Administration and the Financial Services Roundtable, a trade association that represents these banks. Because I wanted to understand what exactly the banks had promised to do, I asked some basic questions:

What types of small businesses were the banks talking about? Were they truly small businesses that needed capital, or were the banks including larger businesses that have tens of millions of dollars of revenue? What type of loans were included in this commitment? Were the banks including credit card lending? Do all of the banks have the same understanding of the commitment?

The questions might seem like nitpicking, but without a clear definition of the kinds of loans and the kinds of businesses, it was hard to know whether the commitment meant much of anything at all. Furthermore, judging by what the banks have stated in their call reports to the Federal Deposit Insurance Corporation, it seemed the big banks had fallen behind in their commitment. But the Small Business Administration and the Financial Services Roundtable assured me that they would be issuing their own report card toward the end of September and that it would clearly state how the banks were doing at the one-year mark of their commitment.

In a blog post published Monday night, the S.B.A. administrator, Karen G. Mills, announced that in just one year “the 13 banks have already increased lending by more than $11 billion.” But the post offered no further information about what the terms of the commitment. Meanwhile the Financial Services Roundtable, the American Bankers Association and the Consumer Bankers Association sent out a release announcing the progress and stating, “Our members are fully committed to increasing lending to small businesses.” Their release was short and simple and similarly provided no additional detail.

According to Ms. Mills, the banks are up by $11 billion; according to the F.D.I.C. call reports, the banks have fallen behind by more than $2 billion. We are still hoping the banks will explain what exactly they have committed to do.

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

Article source: http://boss.blogs.nytimes.com/2012/09/25/the-big-banks-say-they-are-meeting-their-lending-commitment/?partner=rss&emc=rss