Lending to small businesses plummeted by $15 billion in first quarter of this year according to reports released by U.S. Small Business Administration’s Office of Advocacy. Small business lending has shown signs of decline during the last three quarters. SBA report has found that lending to small businesses has fallen steadily during last three quarters. Lending fell on a yearly basis after hitting peak in 2008.
Total small business loans that stood outstanding in March 2011 decreased 2.4% or $14.9 billion to $609.4 billion. Outstanding loans for small businesses surged in 2008 to $711.5 billion but after the onset of recession lending to small business declined.
Banks begun to tighten lending standards and small businesses were found less willing to take on debt. As the recession continued, lending to small businesses dropped in 2009 and 2010. The pain of this credit crunch continued in case of small businesses as larger businesses started to gain easier access to loans.
During recession, nation’s largest banks shied away in lending to small businesses. Big banks came under political pressure to resume lending to small businesses. This came in the wake of receiving billion of dollars as bailout money.
Lending to small businesses by biggest banks is still lagging. Outstanding small business loans by largest lenders with $50 billion or more assets declined 4.9% in first quarter of 2011. Lending by mid-sized banks having assets between $10 billion and $49 billion increased 3.1%. However, small banks of the nation having assets between $1 billion and $9 billion, kept their outstanding loan levels for small businesses steady.
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