Tags: Banks | small | business | lending

Banks' Small Business Lending Continues to Languish

By Dan Weil   |  

Banks' overall corporate lending has bounced back since the financial crisis of 2008, but try telling that to owners of small businesses.

Banks possessed just $585 billion of small-business loans as of March 31, down 18 percent from the 2008 high of $711 billion, according to the Federal Deposit Insurance Corp.

Meanwhile, banks' overall outstanding business loans registered $2.48 trillion March 31, up 9 percent from 2008, The Wall Street Journal reports.

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So what's the problem?

In Carrollton, Ga., "the ripple effects" of the local housing debacle and bank failures have "lasted longer than most anybody expected," William Smith, an economist at University of West Georgia, based in Carrollton, told the Journal.

Tano Phommasith had difficulty obtaining a loan for his Little Hawaiian restaurant in Carrollton. "You would think any banker who came in for lunch and saw how busy we are would want to work with us," he told The Journal.

Stagnant lending to small businesses is a major problem for the economy, as they account for 55 percent of jobs, according to the Small Business Administration.

Meanwhile, the NFIB's (National Federation of Independent Business) small business optimism index rose 0.7 percentage point in July to 95.7, but don't celebrate yet.

Eight of the index's 10 components were little changed. And the two that did appreciate solidly— expectations for business conditions and outlook for expansion—are still historically low.

"Capital spending reports continue to remain mediocre, spending plans are weak, and inventories are too large, with more owners reporting sales trends deteriorating than improving," NFIB chief economist Bill Dunkelberg said in a statement.

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Banks' overall corporate lending has bounced back since the financial crisis of 2008, but try telling that to owners of small businesses.
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