Despite stimulus money pumped into banks intended to boost small business loans, big bank lending in California has decreased by 70 to 75 percent from 2007 to 2009, according to a report by the California Reinvestment Coalition released this month.
Small business lending by just three of the major banks – Bank of America, Citibank and Wells Fargo Bank – dropped by nearly two-thirds leading to half a million fewer small business loans made in California between 2007 and 2009, says the report.
“Americans contributed $700 billion to bail out financial institutions,” said the study’s author, Alan Fisher. “While banks gladly received the funds, they have done almost nothing to extend the same helping hand to small businesses and neighborhoods.”
Minority-owned businesses took the biggest hit, according to the report. From 2007 to 2009, Small Business Association lending to African-American-owned businesses dropped by 81 percent and 84 percent for Latino-owned businesses.
“This hidden tragedy for neighborhoods is in stark contrast to the shameless public announcements of bank profits and high executive salaries,” Fisher said.
Nonprofit community development financial institutions (CDFIs) have tried to fill the lending gap but are having trouble keeping up with the demand.
The report recommends that Congress hold oversight hearings for lenders and federal bank regulators, and the SBA authorize nonprofit community lenders and CDFIs to participate in the SBA 7(a) and 504 programs.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to