Small Business Lending Still Tight, But Could be Easing

11/14/2012

Small-business lending continued to inch downward in the second quarter of 2012, but there are some indications that the longstanding credit crunch could be easing.

The dollar value of small business loans outstanding (loans under $1 million) totaled $587.8 billion in the second quarter, a drop of 0.4 percent from $590.2 billion in the first quarter, according to the Second Quarter Lending Bulletin released Friday by the U.S. Small Business Administration Office of Advocacy. The report highlights some bright spots with respect to small business lending. While loans are still hard to come by, conditions haven't necessarily gotten worse and in some cases have actually improved.

Total small commercial real estate loans declined at one of the slowest rates since the start of the downturn, while small business commercial and industrial lending remained steady during the first half of 2012. Micro-lending (loans under $100,000) seems to have steadied for the third consecutive quarter. Meanwhile, data from the Federal Reserve shows that demand for loans was unchanged. What's more, standards on loans to small firms remained about the same for the fourth consecutive quarter.

Some lenders increased their loans to small businesses, namely those with $500 million to $999.9 million and $1 billion to $9.9 billion in assets. On the flip side, large banks with $50 billion or more of assets decreased their small business lending after remaining relatively flat with only negligible increases for the past few quarters.

Despite some economic improvement, there is still perceived risk with respect to lending to small businesses. The value of new loans being made can't keep pace with the value of loans being paid off, hence the continuing drop in loans outstanding.


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