Small Business Lending Slow to Recover

According to a recent article in the Wall Street Journal, small-business lending has been stuck in a slow recovery behind most other types of business and consumer loans. At the end of the first quarter, banks held $585 billion in loans to small businesses, up 1% from last September but still 18% less than the peak of $711 billion in 2008, according to the Federal Deposit Insurance Corp.  The number of loans for $1 million or less held by banks is down about 14% to 23.5 million since 2008.  Small-business lending remains below recorded 2005 levels.

Federal Reserve data shows that overall lending in the second quarter grew at the highest quarterly rate since the end of the financial crisis, a sign of improvement in the economy. Some analysts are encouraged by recent signs of a lending upswing among small to mid-sized banks.  In July, the total amount of commercial and industrial loans held by small U.S. banks rose 11% from a year earlier, according to Moody’s.  July was the fourth straight month with a double-digit percentage increase.

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