SBA Office of Advocacy SBA Office Small Business and Micro Business Lending in the United States for Data Years 2005-2006 Business Lending in the United States for Data Years Small Business and Micro Small Business and Micro Business Lending in the United States, for Data Years 2006-2007 June 2008 Created by Congress in 1976, the Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal govern- ment. Appointed by the President and confirmed by the U.S. Senate, the Chief Counsel for Advocacy directs the office. The Chief Counsel advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. Economic research, policy analyses, and small business outreach help identify issues of concern. Regional Advocates and an office in Washington, DC, support the Chief Counsel’s efforts. For more information on the Office of Advocacy, visit http://www.sba.gov/advo or call (202) 205-6533. Receive email notices of new Office of Advocacy information by signing up on Advocacy’s Listservs at http://web.sba.gov/list ; ADVOCACY NEWSLETTER ; ADVOCACY PRESS ; ADVOCACY REGULATORY NEWS ; ADVOCACY RESEARCH June 2008 No. 327 Small Business and Micro Business Lending in the United States for Data Years 2006-2007 by Victoria Williams and Charles Ou, U.S. Small Business Administration, Office of Advocacy, Office of Economic Research, 2008. 124 pages. Introduction Overall Findings Annually, the Office of Advocacy prepares a The pace of borrowing and lending in the small study on institutional lending to small firms. business loan markets in 2006-2007 was much The report examines small business lending in stronger than in the previous year, for both micro the economy by all lenders in the United States. business loans under $100,000 and those in the larger The study provides a review of lending activities small business category ($100,000-$1 million). based on two types of data that lenders report to their regulating agencies—the Consolidated Highlights Reports of Condition and Income (Call Reports) • Small business loans outstanding (loans under for June 2007 and the Community Reinvestment $1 million) were valued at $684.6 billion for 24.5 Act (CRA) reports for 2006. Because data are million loans from 8,633 reporting depository available only by the size of the loan, small busi- institutions in the United States and territories in ness loans are defined as business loans under June 2007. This compares with a total of 21.3 mil- $1 million, and micro business loans are those lion loans valued at $634 billion in the previous under $100,000. Those in the $100,000-$1 million year. category are referred to as larger small business • The most significant change in micro business loans. The report includes a discussion of devel- lending (loans under $100,000) was in the num- opments in the small and micro business lending ber of loans, which jumped by 13.7 percent after activities of institutional lenders. No attempt has being relatively flat in the previous period. been made to distinguish SBA guaranteed lenders • The micro business loan market was dominat- in the analysis. Lenders are ranked based on their ed by the largest lenders (asset sizes of more than overall lending, not lending under SBA programs. $10 billion) which represented 66.4 percent of the Part one reviews developments apparent in the number and 58.2 percent of the value of these Call Report data from June 2006 through June small loans as of June 2007. 2007 and the CRA database for the year 2006. • The share of the number of larger small busi- Part two provides directories of the top small and ness loans ($100,000- $1 million) made by multi- micro business lenders in the 50 states, the District billion-dollar lending institutions has declined of Columbia, and some U.S. territories. For the since 2005, from 42.0 percent to 32.3 percent in reader’s convenience, national tables for multi- 2007. billion-dollar banks and bank holding companies • The CRA reports confirm that lending in are presented first, followed by state tables. these larger small business loans mirrors the find- Beginning in 2005, the reports in this series ings in the Call Report data. In 2006, 791 CRA were expanded to include savings banks and sav- reporting institutions extended 11.6 million loans ings and loan associations, in addition to com- that were under $1 million, for a total of $289.8 mercial banks. Geographic coverage has been billion in small business loans. This compares with expanded to include American Samoa, Guam, $271.1 billion for a total of 7.9 million loans made Puerto Rico, and the U.S. Virgin Islands. by 774 lending institutions the previous year. This report was developed under a contract with the Small Business Administration, Office of Advocacy, and contains information and analysis that was reviewed and edited by officials of the Office of Advocacy. However, the final conclusions of the report do not necessarily reflect the views of the Office of Advocacy. Methodology Ordering Information This report observes the environment of lend- The full text of this report and summaries of other ing institution activities using two types of data studies performed under contract with the U.S. reported by financial institutions to their regulat- Small Business Administration's Office of Advocacy ing agencies. Call Reports include information are available on the Internet at www.sba.gov/advo/ on the number and dollar amount of business research. Copies are available for purchase from: loans outstanding in June 2007, and Community National Technical Information Service Reinvestment Act data cover lending to small 5285 Port Royal Road businesses for calendar year 2006. Springfield, VA 22161 The data reported are available by loan size, not (800) 553-6847 or (703) 605-6000 by business size. Small business loans are defined TDD: (703) 487-4639 here as loans under $1 million; mid-sized loans are www.ntis.gov those valued at $100,000 to under $1 million; and Order number: PB2008-109313 micro loans are loans of less than $100,000. Large Paper A07 ($60.00) lending institutions with total domestic assets of Microfiche A02 ($27.00) more than $10 billion are ranked and reported CD-ROM A00 ($40.00) separately, under the presumption that they serve Download A00 ($25.00) a national market. Rankings by state are made for To receive email notices of Advocacy's news- all reporting lenders on the basis of the designated letter, press, regulatory news, and research, visit headquarters state of the reporting lending insti- http://web.sba.gov/list. For really simple syndica- tutions. tion, visit www.sba.gov/advo/rsslibrary.html. Two ranking methods are used, depending upon the availability of data. For lending institu- tions filing Call Reports, for which information on total assets and total business loans is available, four criteria are used as the basis for a lender’s performance ranking. A decile ranking is first computed for individual criteria (decile rankings range from 1 to 10). Lending institutions in the top 10 percent of all lenders in the state receive the maximum score of 10; banks in the lowest 10 percent receive a score of 1. Lenders that do not lend to small businesses (loans under $1 million) receive a 0. A summary ranking consolidating the four decile rankings is computed for each institu- tion in the state rankings. Four top scores will sum to 40. To make the top score total 100, each score is multiplied by 2.5. To rank state lending using the CRA data, lenders are listed in order of the dollar amount of small business loans made in each state in 2006. Large institutions therefore appear at the top. Simple rankings are used for multi-billion-dollar lending institutions because a small number of lenders is involved. This report was peer-reviewed consistent with Advocacy’s data quality guidelines. More informa- tion on this process can be obtained by contacting the director of economic research at advocacy @ sba.gov or (202) 205-6533. Small Business and Micro Business Lending in the United States, for Data Years 2006-2007 Office of Advocacy U.S. Small Business Administration Washington, D.C. June 2008 Foreword This edition of the Office of Advocacy’s annual study of lending to small and micro businesses by most depository institutions in the United States continues its expanded coverage. Included, in addition to banks, are other depository institutions, such as federal and state savings banks and savings and loans associations, and broader geographic coverage extended to the U.S. territories. The source information consists of two types of data reported by depository institutions to their respective regulating agencies—Call Reports for June 2007 and Community Reinvestment Act (CRA) reports for 2006. The smaller number of institutions required to submit CRA reports means that the coverage of small business lending activities under CRA reporting is reduced relative to Call Report coverage. This study covers both small business lending (loans of less than $1 million) and micro business lending (loans of less than $100,000, a subset of small business lending) for all reporting institutions, and for multi-billion-dollar lending institutions for the 2006–2007 period. Some information is also provided about the subset of larger small business loans between $100,000 and $1 million. The report provides data on the top institutions lending to small businesses in each state. Advocacy’s website contains additional data listing the lending activity of all lenders in the 50 states, the District of Columbia, and U.S.