Introduction
Small businesses contribute to the dynamism and growth of the U.S. economy, Our research shows how Forum members provide a significant amount of credit to small businesses across America.
Small Businesses are Important to the U.S. Economy
Small businesses contribute to the dynamism and growth of the U.S. economy. Small businesses employ a large number of Americans. According to U.S. Census data, 42 million Americans worked for firms with less than 100 employees in 2017. The Forum member institutions provide a significant amount of credit to small businesses across America.
Forum members extend significant amounts of credit to small businesses
Our members hold a total of more than $90 billion in loans to small businesses, roughly double the amount extended since 2007.
- Small business loans are generally defined as those loans with an original amount less than $1 million
- In 2019, Forum members account for one-quarter of all loans to small businesses
Sources: FDIC Call report, available at https://cdr.ffiec.gov/public/; FDIC Loans to Small Businesses and Small Farms, available at https://www.fdic.gov/bank/analytical/qbp/timeseries/small-business-farm-loans.xls
Forum members hold significant amounts of smaller loans more likely to reach small businesses
Our members hold $57 billion in loans less than $100,000, double the amount extended since 2007.
- Loans under $100,000 account for more than 60% of all loans made to small businesses by Forum members
- In 2019, Forum members account for more than one-third of all business loans under $100,000
Sources: FDIC Call report, available at https://cdr.ffiec.gov/public/; FDIC Loans to Small Businesses and Small Farms, available at https://www.fdic.gov/bank/analytical/qbp/timeseries/small-business-farm-loans.xls
Forum members lend to small businesses across the United States
Forum member small business lending supports entrepreneurship across the nation and in a wide array of communities.
Sources: FFIEC Community Reinvestment Act, available at https://www.ffiec.gov/cra/default.htm, U.S. Census Bureau County Population Totals, available at https://www.census.gov/data/datasets/2017/demo/popest/counties-total.html
- These data reflect originations of small business loans from 2010-2016 by Forum members
- Small business lending is spread throughout the United States and areas with the highest percentage of small business lending per capita represent a diversity of geographic regions
Forum members lend in large and small communities across the United States
One-third of our members’ small business lending is in smaller communities. Small communities are defined as those U.S. counties with a total population below 500,000 per CRA reporting. While there tends to be more lending in large counties (due to the amount of people and economic activity), Forum members engage in significant lending in thousands of smaller communities.
Source: FFIEC Community Reinvestment Act, available at https://www.ffiec.gov/cra/default.htm
Forum members actively support small business lending through a variety of initiatives
Initiatives at Forum member banks support small businesses in communities across the United States in a way that has a tangible effect on real people’s lives. For example:
- Bank of America supports veteran entrepreneurship through its Veteran Entrepreneur Lending program
- Citi supports small businesses across the country through its City Accelerator program
- Goldman Sachs supports small business lending through its 10,000 Small Businesses program
- JPMorgan Chase supports small businesses in places like Detroit through the Entrepreneurs of Color fund
- Morgan Stanley has partnered with the National Urban League to support minority entrepreneurship through the Capital Access Fund
- Wells Fargo supports small business lending through its Diverse Community Capital program
Despite strong Forum member support for small business lending, aggregate trends are less positive
Aggregate lending to small businesses fell significantly from 2007 to 2011 and is just now returning to previous levels.
- In the aggregate, small business lending is just now returning to levels that were observed in 2007
- Researchers have explored the reasons for the slowdown in small business lending
- Regulation is identified as one factor impeding small business lending
Recent research points to the impact of regulation on small business lending
Researchers from the National Bureau of Economic Research find that Dodd-Frank (DFA) regulation has impacted small business lending.
Source: The impact of the Dodd-Frank Act on Small Business, Michael D. Bordo and John V. Duca, http://www.nber.org/papers/w24501.pdf
- The researchers find that DFA impacts small business lending
- “By increasing the fixed regulatory compliance requirements needed to make business loans and operate a bank, the DFA disproportionately reduced the incentives for all banks to make very modest loans… ”
- The researchers focus on small banks, but acknowledge that the impacts are felt across the entire spectrum of bank size
*Updated November 2019