When it comes to small-business lending, banks may be victims of their own success.

New data show that small-business loans of $1 million or less have climbed a healthy 12.3% since last year, to $155.5 billion outstanding at June 30.

But bankers say the glut of credit -- and potential lenders -- to small firms has left borrowers dictating terms.

"We're seeing much greater competition on price, structure, and turnaround time," said Sandra Maltby, senior vice president at Cleveland-based Keycorp and manager of its small-business division.

Her experience is not unique. Banks have aggressively pushed into small-business lending because of the promise of double-digit credit growth.

But after years of developing a reputation for neglecting smaller customers, lenders find the balance of power has shifted.

"The reason is that borrowers are in a better position to negotiate," said Cynthia Glassman, managing director of Furash & Co., a Washington-based consultancy. "There is more funding available, and the companies themselves are healthier."

Indeed, loans by all banks to small firms grew by $17.1 billion from the $138.5 billion outstanding at midyear 1993. Just released call data provide, for the first time, a year-to-year comparison of small commercial loans.

The growth rate is considered remarkable given that the data are only broken out for loans of $1 million or less, which bankers say represent only a fraction of a market they estimate exceeds $400 billion.

While banks in urban areas have watched the competition heat up, their competitors in rural areas see little new. James Boone, president of Sunburst Bank, Grenada, Miss., said the competition, while stiff in the more than 50 communities where his bank operates, has picked up over the past year.

"We really don't see that much change over the past," Mr. Boone said. "We are seeing some trends where, because of community reinvestment regulations, people are starting to look more at small-business loans."

Even usually pessimistic small businesses are acknowledging that credit is easier to get now. In a recent study by the National Federation of Independent Business, participants said credit was easier to obtain in the second quarter than in the previous one.

"Members always consider credit harder to get now than in the previous three months, even in the best of times," said William Dennis, a senior research fellow at the federation. "So these are pretty significant differences."

Businesses were also saying, in record numbers, that they could meet their credit needs. In September, survey participants said, by a six-to-one margin, that credit was easier to obtain; the ratio had been 4.6-to-1 a year earlier.

"I think the dominant engine here is the economy and the ability of banks to mine the small-business market," said Warren Heller, research director at Boston-based Veribanc.

As the need for capital grows, community banks -- those with less than $1 billion in assets -- continue to control 50.1% of the small-loan market.

At midyear, smaller banks had $79.6 billion of loans outstanding. Their dominance was even more pronounced with loans of $250,000 or less, where 60% of the $93.3 billion in credits had been granted by community banks.

Not surprisingly, community banks also make more small-business loans as a percentage of all commercial and industrial loans than their larger competitors do.

More than 80% of small banks' portfolios consisted of loans to small borrowers, compared with 37.6% at super community banks, 27.1% at regional banks, and 5.1% at superregionals.

While community banks as a group lend the most to small businesses, the four banks lending more than $1 billion to small businesses are of either the regional or superregional class.

San Francisco-based Wells Fargo Bank was the runaway leader in small-business lending.

With $1.4 billion in such loans outstanding, it outpaced second-place finisher and rival BankAmerica Corp.'s $1.032 billion by 39.5%.

Wells Fargo's 84,670 small-business loans also topped the list in terms of the number of small loans outstanding. In second place was National Westminster Bank of New Jersey, with 43,738 such loans.

The two other billion-dollar small-business lenders hailed from the East. PNC Bank of Pittsburgh, was ranked third in loans outstanding with $1.028 billion. National Westminster rounded out this group, with $1.027 billion.

Topping the list of super community bank lenders, those with assets of $1 billion to $5 billion, was Continental Bank, Norristown, Pa. a subsidiary of Midlantic Corp.

The $4 billion-asset institution reported $375.5 million worth of small loans outstanding at June 30.

The prize for most prolific small-business lender in the super community group goes to West One Bank Idaho. The $4 billion-asset Boise-based institution generated 8,289 loans totaling $332.3 million. That was enough to lead Sunburst Bank, which made 7,670 loans worth $345.4 million.

The top small-business lender among community banks was Mid American National Bank and Trust Co., Toledo, Ohio. Its $153.3 million in small loans accounted for more than one-fifth of the bank's $759 million of total assets.

Regardless of what the numbers show, analysts advised using caution when reading the data.

Because the June 30 report is just the second in the series, bankers are still grappling with what they should include as loans to small commercial and industrial companies. As a result, analysts say, year-over-year comparisons may not be completely reliable.

"To use these numbers to draw conclusions is taking the numbers too far," said Veribanc's Mr. Heller. "It usually takes three to four times before they become reliable." Superregional Banks ($35B+ assets)Wells Fargo Bank. $1,439,822San Francisco Bank of America, 1,032,000San Francisco PNC Bank. 1,027,720Pittsburgh First National Bank of Boston, 881,938San Francisco Citibank. 777,805New York Regional Banks ($5B-$35B assets)National Westminster New Jersey, $1,026,848Jersey City Comerica Bank. 992,008Detroit Norwest Bank Minnesota, 958,849Minneapolis Seattle-First National Bank, 953,000Seattle NBD Bank, 916,817Detroit Super Community Banks ($1B-$5B assets)Continental Bank, $375,490Norristown, Pa. Sunburst Bank, 345,418Grenada, Miss. West One Bank Idaho, 332,282Boise, Idaho National Bank of Commerce, 326,744Memphis First Source Bank, 323,195South Bend, Ind. Community Banks (Less than $1B assets)Mid American Bank and Trust, $153,333Toledo Silicon Valley Bank, 136,836Santa Clare, Calif. Monroe Bank and Trust, 132,463Monroe, Mich. Washington Trust Bank, 131,191Spokane, Wash. Merchants Bank of New York, 130,905New York

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