April 24, 1998

LENDING TO SMALL BIZ: IT'S STILL BOOMING

Bank lending to small businesses grew a robust 8.8% last year, reports the Small Business Administration in its annual report on small-business loans.

For the 12 months ending June, 1997, small companies snared a total of $184 billion in commercial and mortgage credit. The total dollar amount of loans greater than $1 million climbed nearly 11% in that time, with loans of less than $1 million growing at a somewhat slower, but healthy, 5.7%.

The SBA report, which analyzes call data from 9,293 banks, also found that growth in the number of small-business loans tripled over the previous year: Loans of less than $250,000 grew by 25% in 1996 and 1997, compared with just 8.5% in the prior 12 months.

How has bank consolidation affected small-business lending? By most SBA indicators, big mergers have wrought few drastic changes in this area. The numbers bear out, however, just how much lending power the nation's largest banks wield, with total small-business-loan dollars growing fastest among banks with assets greater than $10 billion. Another class of merger-prone institutions -- those with assets between $500 million and $1 billion -- also saw their small-biz-lending dollars surge.

Perhaps of most interest to small-business owners are the SBA's "report cards," which rate the nation's banks by "friendliness" to small companies. This friendliness score is based on four different measures, including the ratio of a bank's small-business loans to total loans and its willingness to sign off on "micro loans" of less than $100,000. For a complete state-by-state listing, visit the SBA Web site at http://www.sba.gov/ADVO/lendinginus2.html.

By Dennis Berman, Staff Reporter, Business Week Online