Rise in small business lending boosts hope

2 min read ·


Pen on borrower's languageRecent reports on small-business lending activity suggest that an engine for the American economy may be revving up.

The U.S. Small Business Administration (SBA) said that small business loan activity reached the highest mark in the agency?s history during FY2011. The record loan approval volume, totaling $30.5 billion, marks a return to pre-recession levels, the SBA said.

The money was loaned to 61,689 small businesses and startups during the fiscal year, which ended Sept. 30. That compares to $22.6 billion (60,771 loans) in FY2010 and $17.9 billion (50,830 loans) in FY2009.

Accentuate the positive

"Small businesses are the backbone of the economy, and SBA has been there to help them rebound through difficult times over the past few years," said SBA Administrator Karen Mills. "First through the Recovery Act and then through the Small Business Jobs Act and new SBA lending programs, SBA has provided small businesses with the tools they need so they can grow and create jobs."

Another index reported that a spike in August was the highest for lending activity since April 2008. The Thomson Reuters/PayNet Small Business Lending Index, which measures overall volume of financing to U.S. small businesses, was up 19% from the prior August and up 8.6% from July.

The spike should lead to good news on the job front down the road, said PayNet founder Bill Phelan.

"Any time you put in new plants and equipment, you've got to have people who sit in front of them — we will see job growth," he said.

PayNet also cited small declines in loan delinquencies in August as reasons for optimism.

Jobs data still a problems

The two reports came during the same week the Department of Labor announced that the unemployment rate was unchanged in September (9.1%), with a gain of only 103,000 jobs.

The National Federation of Independent Businesses (NFIB) also delivered gloomy news, saying that small-business owners reported an overall reduction in employment, posting an average reduction of 0.3 workers per firm in September.

The data comes from a sampling of 729 NFIB members.