March 3, 2021

You’re the Boss Blog: Who’s Making More Small-Business Loans Now? You May Be Surprised

The Agenda

How small-business issues are shaping politics and policy.

Last week’s news that total commercial lending is up for the first time in three years but small-business lending continues to fall got The Agenda wondering: Is that true across the board? Or are some banks actually making more small-business loans, while others are making fewer?

We know that the biggest banks are making fewer Small Business Administration-backed loans. Perhaps, then, they are also making fewer traditional small-business loans as well. So The Agenda dove back into the Federal Deposit Insurance Corporation’s lending statistics — and discovered a surprise.

As of June 30, the nation had 7,522 insured banks, which The Agenda divided into three cohorts. The vast majority — 91 percent — have fewer than $1 billion in assets. A much smaller group has $1 billion to $10 billion in assets. The 107 institutions with more than $10 billion in assets –the conventional line between big and small banks — constitute just 1.4 percent of the industry but control 79 percent of all assets among American banks.

Here’s what we learned: though small banks are often said to have a propensity for small-business lending, total small-business portfolios fell by 1.6 percent in the last quarter in both of the two categories of smaller banks. Big banks — the ones that are supposedly gun-shy about small companies — actually increased their total small-business loan portfolio by 0.9 percent.

The Agenda dove a little deeper. Among the big banks, those with $10 billion to $100 billion in assets increased their small-business loan volume by 1.6 percent. And the very largest institutions — the 19 banks with more than $100 billion in assets — increased their small-business portfolio, too, though only by 0.4 percent. Of course, these numbers hardly suggest an open spigot of capital for the small-business borrower, or really for any borrower.

Responding to last week’s post about the decline in small-business lending, a commenter who identified himself as seltzerman suggested that the situation wasn’t as dire as the numbers made it seem. “There are other unmeasured events that are cushioning this blow,” he wrote last week. “There is still lending (involuntarily) to underwater homeowners in the form of accumulated mortgage payments that have not been paid. There must be at least a couple entrepreneurs in that pool who have rented out rooms in their homes and are diverting a year or two of unpaid mortgages into some small business.”

If there are, The Agenda would like to hear from them. Please send a note. I’ll be happy to keep the conversation confidential.

Article source: http://feeds.nytimes.com/click.phdo?i=4567b5877685b48eec9ab3b19b6c937c

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