Loans

Community Bank Lending To SMBs On The Upswing

New data shows that community banks lending to small businesses has increased in recent years. The U.S. Government Accountability Office (GAO) analyzed community bank lending and financial data from 2001 through 2017, as well as surveyed a sample of over 450 community banks from around the country. It then used that information — along with addition data — to build econometric models.

“Community banks — generally small and locally focused institutions — are important sources of credit to small businesses,” according to the report.

The report pointed out that previous data might not have been entirely accurate because the data excludes some loans to small businesses: “Specifically, the definition of small business loans used for banks’ reporting excludes loans greater than $1 million and has not been adjusted for inflation since 1992.”

In addition, the previously reported data captured loans by their size rather than by the size of the company, which means it could include small loans to large businesses.

After adjusting regulators’ data to account for community bank mergers and other exits, GAO discovered that remaining banks’ lending to SMBs increased from 2013 through 2017 by 5 percent, and that total business lending by all community banks grew to exceed 2010 levels. GAO’s data discovered that community banks’ total business loans outstanding increased during that time frame, growing from about $689 billion in 2010 to about $765 billion in 2017, or approximately 11 percent.

“When we accounted for exits from the community bank population, the increase was even larger. Specifically, survivor community banks’ total business lending increased by about 36 percent, from $563 billion in outstanding loans in 2010 to $765 billion in 2017,” stated GAO.

The report noted that credit unions grew their SMB lending from 2010 through 2017 by 109 percent, increasing from $12 billion in outstanding loans in 2010 to $25 billion in 2017. The number of small business loans by credit unions also rose by about 85 percent, from around 79,000 outstanding loans in 2010 to about 146,000 in 2017.

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