Surprise! Banks Loaning Less To Small Businesses

A report in yesterday’s Wall Street Journal Online reveals that bank loans to small businesses are down 9%. That in itself is probably not news, especially to small businesses owners. The real news is that while small business lending is down 9%, overall lending is down only 4%. It seems the big banks are the real grinches. One of the finer points in the research showed that among banks who took TARP money, larger banks had fewer small business loans than their community counterparts.

The article was inconclusive as to why small businesses lending was down more than twice that of average lending. Whether it is due to the banks’ being hampered by increased regulation or to small businesses being reluctant to take on more debt, no one was willing to say if the problem was fewer lenders or fewer borrowers.

But the truth, as usual, is probably somewhere in the middle. Those who need the money the most are those who have fallen below the banks increased tolerance level. And the small businesses with strong balance sheets are likely keeping it in house to remain strong.

At Cathedral we’re into helping all of our clients move into the “strong balance sheet” category, and stay there. Even in these difficult times, it can be done.