Study: small business credit card loans up in 01-02

The number of micro-business loans made by U.S. banks jumped by 45 percent in 2001-2002 according to a report released Dec. 9 by the U.S. Small Business Administration's Office of Advocacy. The report, "Small Business and Micro Business Lending in the United States, 2002 Edition," indicates that the large increase in the number of micro-business loans (under $100,000) was primarily the result of promotion and use of small-business credit cards.

Small-business lending as a whole showed only moderate increases during the same period. The country was just emerging from recession and both borrowers and lenders continued to hold off new borrowing and lending in reaction to the uncertain economy. While the smallest business loans increased by 45 percent, the number of loans between $100,000 and $250,000 increased 8.8 percent and those between $250,000 and $1 million increased by 9.8 percent.

"Access to credit is vital for small-business survival," said Thomas M. Sullivan, chief counsel for advocacy, in a news release. "It's critical that small firms know how banks are meeting their credit needs and which banks are investing in small business. This report is one tool small businesses can use when they shop for loans, and it also provides policymakers with data they need to make informed decisions on financial matters."

The report, which was designed to aid small firms in their search for capital, also analyzes bank lending patterns across the United States and across commercial bank sizes. It ranks banks based on their small-business friendly and micro-business friendly lending. The report does not rank bank participation in SBA-guaranteed loan programs.

Consolidated Reports of Condition and Income (call reports), which banks submit to their federal regulators, and Community Reinvestment Act reports provide the data for the full study. Both the call report and CRA data provide useful information, but they are not comparable. Call report data is considered the most useful when analyzing a bank's commitment to small-business lending in their state. CRA data is best for understanding the small-business lending activities in different states by large banks and large bank holding companies.

The Office of Advocacy, the "small business watchdog" of the government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the president. It is the source for small business statistics presented in user-friendly formats and it funds research into small business issues.

For the full report, visit the Office of Advocacy Web site at www.sba.gov/advo.