Small business banking has struggled mightily over the last two years, but we're beginning to see signs that greater financial strength is around the corner. After ten quarters in a row of decline, bank loans to small businesses increased at the end of 2012, albeit only modestly, by 0.4 percent.
Call report data from the Federal Deposit Insurance Corporation (FDIC) showed a modest uptick in small business lending between September and December of 2012, from $584.1 billion at the quarter to $586 billion.
It's not a large increase, but given the general stagnation of the economy in recent years and the sluggish lending market for small enterprises, any rise is a good one. The FDIC cited a few possible reasons for the increase in loans, most notably improving financial conditions nationwide and low interest rates.
Heather Endresen, senior vice president with Union Bank, a small business lender, told The Press-Enterprise that the environment is beginning to look better for business owners, and those who have weathered the recent recession will come out ahead in the end.
"Businesses that have survived in the last four years are strong," Endresen said. "If they can make it through that, then they're pretty solid."
Endresen added that loans are now a more viable strategy for the banks as well – considering the interest money they can collect from small businesses, lending is still a very profitable venture.
"The best way for a bank to make money is to make loans," she said.
The FDIC's report details the billions of dollars doled out to small businesses by major American banks. SNL Financial disclosed the details – Wells Fargo led the charge in 2012, giving out 664,542 loans for a total of $32.8 billion, followed by Bank of America at $26.2 billion and JPMorgan Chase at $19.8 billion. American Express and U.S. Bank were in 11 digits as well.
All told, American banks made nearly 20 million loans to small businesses in 2012, an impressive number that signifies a noticeable turnaround in the economic climate for entrepreneurs.
According to SNL Financial, the number of nonfarm loans to small businesses has more than quadrupled since 1995. Not only has lending rebounded in recent months, but it's also shown tremendous growth overall over the last two decades, proving that there's always room in America for small enterprise.