Why is Small-Business Lending Down $15 Billion?

Lending by big banks dropped 4.9 percent in the first quarter of 2011, according to a new report.

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Why are small business loans down $15 billion in the first quarter of 2011?Bank lending to small businesses fell a dramatic $15 billion in the first quarter of 2011, according to a new report by the Small Business Administration.

Nominal small-business loans outstanding have now declined to levels below those reported in June 2006.

Small businesses are struggling to secure loans from banks, as the number of loans fell 2.4 percent in March, nearly double the decrease between the third and fourth quarters of 2010.

Big banks are turning small businesses away at the greatest rate -- their lending to small businesses decreased by 4.9 percent in the first quarter. Small-business owners have better luck with midsize and small banks, which have maintained steady rates of small-business lending despite the economy.

Victoria Williams, an economist with the SBA, noted that "lending could be down because small-business owners are not asking for loans."

"They could be working on paying down existing debt and not taking on more," she added.

(For more on the current lending state of the SBA, check out our interview with SBA Administrator Karen Mills, who fielded questions from our Board of Directors.)

Tags: News, SBA, SBA loans, SBA Office of Advocacy, small busines lending

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