Slideshow Are the Big Banks Open for Small Business Lending?

  • February 16 2015, 7:00am EST
9 Images Total

Lending by the country's four largest banks to small businesses tumbled during the crisis and had not recovered by 2013, according to data compiled by Rebel Cole of DePaul University. The banks cite dormant demand for such loans and regulatory pressures that have discouraged risk taking. Bankers say an upswing in business confidence bodes well for lending in 2015, but Cole and other academics say available data suggests access to credit remains tight. A look at each of these banks' small-business lending activities follows, including data Cole aggregated from Federal Financial Institutions Examination Council and Community Reinvestment Act filings.

Image: iStock

We Would if We Could

Banks might be struggling to make enough small business loans, but that's not due to any lack of desire, according to Jamie Dimon. The JPMorgan Chase CEO has been a vocal critic of banking regulators, who he claims have forced banks to become increasingly risk-averse. "In the old days, you dealt with one regulator. Now it's five or six," Dimon said recently.

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Doing Right by Doing Good

By at least one measure, however, JPMorgan Chase is making an effort to ensure enough credit makes it into the hands of women and minority entrepreneurs. According to the Small Business Administration, the megabank has ranked as the number-one lender to minority and women-owned businesses the past three years.

Signs of Life

Wells Fargo said its small business lending has been hampered by weak demand, but that may be changing. Optimism among small business owners, as measured in the bank's quarterly small business survey, is at its highest level in seven years, said Marc Bernstein, head of business direct lending and the small business segment at Wells. "All indications point to a very positive future," Bernstein said.

One-Stop Shop

Wells appears to be doing a good job of leveraging its business relationships to cross-sell additional products. Its number of primary business checking accounts rose 5.4% in 2014, according to Lisa Stevens, head of small business at the bank.

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Growth at B of A …

In its third-quarter filing with the Securities and Exchange Commission, Bank of America reported its portfolio of commercial small business loans totaled $13.5 billion, up 1.5% from the same period in 2013.

…But Not in SBA

Bank of America says it does business with more than 3 million small business owners. However, its loan numbers reflect a relatively small commitment to SBA 7(a) lending. Through the first quarter of the SBA's 2015 fiscal year, the company had closed 62 loans totaling $14.4 million. Wells Fargo, by contrast, made more than 1,100 7(a) loans in the same period, according to statistics compiled by the SBA.

Citi Also Expands…

According to CEO Michael Corbat, Citigroup lent $9.2 billion to small businesses in 2014. Speaking before the Omaha Chamber of Commerce Jan. 27, Corbat said the $9.2 billion total is more than double the amount Citi lent small businesses five years ago.

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…But Again, Not in SBA

Like Bank of America, Citi does surprisingly little SBA lending for an institution its size. According to SBA, Citi made only 40 loans under the agency's flagship 7(a) program through the first three months of the 2015 fiscal year.