SBA says small business lending up, but some feeling left out

September 28, 2012

This week Small Business Administration chief Karen Mills gave America’s top banks a pat on the back for boosting their lending to small businesses over the last 12 months, while separate data showed that funding for the most needy small businesses actually contracted.

In a blog posted on the SBA’s official website, Mills trumpeted that the U.S.’s top 13 biggest banks have increased loans to small businesses by a whopping $11 billion since last September as part of a commitment to boost lending by $20 billion by the end of 2014.

“The continued success of this commitment serves as an important example of what is possible when the public and private sectors work together to assist America’s small business owners and entrepreneurs,” Mills wrote.

While not disputing Mills’s arithmetic, small business funding expert Ami Kassar said the $11-billion figure “does not represent Main Street lending whatsoever.”

Kassar, whose Philadelphia-based company MultiFunding LLC helps small businesses get their hands on capital from a variety of lenders, said the SBA number covers loans made to businesses with as much as $20 million in revenue who tend to borrow in excess of $1 million.

He said a more accurate gauge of small business lending activity are loans of less than $1 million, which Kassar said represents “99 percent” of small business borrowing.

According to Kassar’s calculations from banking data gleaned from call reports, or balance sheet information, filed with the Federal Deposit Insurance Corporation – an independent regulatory body that overseas the banking industry – lending by the top 13 banks is down nearly $2 billion.

“If you have a decent company with revenue between $5 million and $20 million, banks will fight to give you a loan,” said Kassar. “The problem is lower down the totem pole.”

In rebuttal, the SBA said the FDIC data does not take into account any small business loans made over $1 million, which comprised nearly half of the $4.2 billion in SBA 7(a) loans made by the top 13 banks in 2011.

JPMorgan Chase & Co , the nation’s top lender of SBA-backed loans, said it made $10 billion in small business loans in the first half of this year, a 35-percent jump over the same period in 2011.

“Bank of America, the country’s largest bank, said it doled out more than $4 billion in new small business loans in the first six months of 2012, a 23 percent increase over the previous year. Through the first half of the year, the bank said it made nearly $9 billion in total loans to small businesses, which it defines as a companies with less than $20 million in revenue.”

“The bank has continued this strong trend and is currently on pace to exceed its 2012 pledge by more than $1 billion,” said Bank of America spokesman Don Vecchiarello.

However BofA’s loans of under $1 million declined $570 million during the 12-month period ending June 2012, according to Kassar’s data.

For him, the big problem is the changing definition of what constitutes a small business.
“Access to capital for small businesses is such a critical issue for economic recovery and it needs to be measured and tracked properly.”

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