Study Offers Overview of Small Business Lending
Jul 13th, 2009 | By Dawn R. Rivers | Category: ResearchLast week, the SBA Office of Advocacy released a compendium of research on small businesses and access to capital, a topic very much in the forefront of small business policy makers over the last ten months. The research consists of four papers, released under the single and easy to understand title Small Business in Focus: Finance. We’ll be taking a look at each of those papers, beginning this week with the first of them. It is, appropriately enough, an overview of the small business lending market, entitled “Lending to Small Businesses by Financial Institutions,” written by Charles Ou, senior economist for Advocacy, and Victoria Williams, another of Advocacy’s economists.
The paper starts out by taking a brief look at the universe of small business borrowers. About half of sole proprietorships had less than $10,000 in receipts in 2005 and 81.8% had receipts of $50,000 or less, making them perhaps less-than-ideal borrowers. So-called microbusiness lending (loans of less than $100,000) was dominated by multi-billion-dollar banks doing a brisk business in small business credit card accounts, while smaller banks issue few small business credit cards and focus their small business lending on loans of between $100,000 and $1 million. The report points out that the small business credit card market is relatively new and requires further study. The failure of the Senate earlier this year to adopt language that would have made provisions of the Credit Cardholders Bill of Rights applicable to small business owners demonstrates that such information is very much needed — and the sooner, the better.
