Small Business Lending Shrinks $1B - Analyst Blog

According to a report released by the Treasury late last Friday, major banks have cut small business lending by $1 billion in November. This marks the seventh straight month of decline in small business lending. The banks' total lending dropped 4.6% in that seven-month period, to $256.8 billion. 

Following the Treasury’s requirement of filing monthly reports, the 22 banks that received the majority of government aid have slashed their small business lending balances by $12.5 billion since April. 

The banks are conservative with respect to small business lending as small businesses are risky borrowers and fewer entrepreneurs are looking to borrow on the backdrop of slower sales. On the other side, tighter lending standards restrict small businesses from growing or financing their operations. 

Last month, President Obama and his administration met with several CEOs of the nation's major banks to incite them to increase their small business lending. 

We expect the drop in small business lending to end in the near term with the government’s encouragement and the efforts of some big banks including Bank of America (BAC) and Wells Fargo (WFC) to increase their small businesses lending. 

In November, small business loan balances increased for 5 out of the total 22 banks compared to April. But 10 banks have slashed their small business balances every single month since April. For instance, JPMorgan's (JPM) small business loan balance has declined by about 3.7% in the past seven months. The bank has been posting decent profits in recent quarters. 

Though there is optimism for small businesses with respect to the near term increasing lending trend, banks are not expected to ease their watchfulness on the borrowers.
Read the full analyst report on "BAC"
Read the full analyst report on "WFC"
Read the full analyst report on "JPM"
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