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  • SF Fed Economic Letter: A Potential Decline in the Decline of Small Business Lending

    While the number and overall value of loans to small businesses continues to decline, the rate of decline may be leveling off, according to San Francisco Fed economists Liz Laderman and James Gillan . In an Economic Letter , Laderman and Gillan chart lending to small businesses from large and small banks. Here's the trend for large banks: Laderman and Gillan write: The small business loan trend at large banks is similar to the trend for all banks. Aggregate small business loans at large banks shrank between June 30, 2008, and June, 30, 2009, at a steeper rate from then until June 30, 2010, and more slowly over the four quarters to June 30, 2011 (Figure 1). At those large banks, the rate of contraction moderated for small CRE loans and especially for small C&I loans. The moderation in C&I contraction since mid-2010 is consistent with the results of the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices, which gathers data from approximately 60 large domestic banks plus some U.S. branches and agencies of foreign banks. The July 2010 survey was the first to show an easing of standards on C&I loans to smaller businesses since late 2006 (Federal Reserve Board 2010). But, whether positive growth in small C&I loans at large banks will soon occur and be sustained may depend on small business loan demand. The National Federation of Independent Business reports that about 25% of the small businesses it surveys cite poor sales as their main business problem. In contrast, only 3% cite financing as their main business problem, although 8% report that not all of their credit needs are satisfied (Dunkelberg and Wade 2011). It appears that a key variable for banks, small banks in particular, is whether small business loans are backed by commercial real estate or not. Those loans not backed by real estate are looking more promising. Read Recent Trends in Small Business Lending here .

  • Another Call for Startups in a Downturn

    Rohit Arora may not believe in the strength of the US economy right now, but he still believes that current conditions should encourage new business ventures. Arora started Biz2Credit at the height of the financial crisis three years ago. So he has put his money where his mouth is. At Small Business Trends , Arora gives four reasons that now is a good time for startups: 1) Job Growth Is Almost Nonexistent 2) Low-Cost Capital Is Available 3) Technology Makes It Easier to Go Into Business Than Ever Before 4) America Has a Heritage of Entrepreneurship Okay, so the fourth reason is a little less scientific (indeed, Arora might make many economists roll their eyes when he credits small business for leading the US out of past recession), but the others represent classic downturn opportunities. Do you see others? And what are the primary impediments for new business ventures at this stage beyond the uncertainty of the larger economic picture? Read Arora's full post here .

  • Reports of Looser Credit Standards for Small Business Yet to be Confirmed by Small Business Owners

    Case Western Reserve 's Scott Shane is trying to figure out whether small business owners are finding it easier to get credit now than during the recession. And, as he shares at Small Business Trends , he's found conflicting data. On the one hand, there is the trend of more loan officers reporting looser credit standards, as Shane shows here: And yet, according to a couple of key surveys, small business owners themselves say they have not seen any loosening of standards. Still, Shane finds some cause for optimism amid all the confusion: Maybe I should look at the bright side. The lack of agreement that small business access to financing got worse in the past year means that the situation is improving. Before the recovery started everyone agreed that small business access to credit had deteriorated. Read the full post here .

  • Martin Baily on Jump-starting America's "Job Creators", Small Businesses

    Martin Baily -- Senior Fellow in Economic Studies at the Brookings Institutions, and former Council of Economic Advisers Chair--says the government needs to do everything it can to get growth moving. And he is specifically interested in targeting small businesses as the engines of that growth--largely through hiring. That may mean "getting out of the way" of business at times. But it also means directing funds to small businesses through the Small Business Administration . Baily and Brookings colleagues Karen Dynan and Douglas J. Elliott , have authored a policy brief on how to help small businesses lead the way toward economic recovery, and they made the following recommendations to the Obama Administration: Improve access to public and private capital. Reexamine corporate tax policy with an eye toward whether provisions of our tax code are discouraging small business development. Promote education to help businesses struggling with shortages of workers with particular skills, and promote research to spur innovation. Rethink immigration policy, as current policy may be contributing to shortages of key workers and deterring entrepreneurs who wish to start promising businesses in our country. Explore ways to foster “innovation-friendly” environments, such as regional cluster initiatives. Strengthen government counseling programs. This week Baily spoke about how the government should work to help small businesses in this @Brookings interview: Read The Future of Small Business Entrepreneurship: Jobs Generator for the U.S. Economy here .

  • SBA's Karen Mills Responds to Questions About Access to Credit

    Karen Mills Administrator for the Small Business Administration, and Treasury Secretary Timothy Geithner will be holding a forum with business owners tomorrow to discuss small business financing. In advance of that forum, Mills responded to questions from small business owners in a live chat yesterday. The majority of the questions focus on access to credit and SBA backed loans: