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Office of Advocacy |
Among the highlights of the study are the following:
The Office of Advocacy has recently published two companion reports, the 1997 edition of Small Business Lending in the United States, and The Bank Holding Company Study, 1997. The first study rank-orders (within each state) all 9,293 U.S. banks in terms of their small business lending. The second lists bank holding companies that are top lenders to small business. In both studies, a small business loan is defined as a loan of less than $250,000.
Our readers have made many helpful suggestions about the format of this report, and a number of them have been incorporated in this edition to improve its usefulness, while preserving comparability with earlier editions. Thanks to those who have helped fine-tune this effort. Comments and suggestions are always welcome.
For those with access to the Internet, the studies are available at http://www.sba.gov/advo/stats/lending/.. Copies of all three reports are also available by calling the National Technical Information Service at (703) 605-6000.
Jere W. Glover
Chief Counsel for Advocacy
U. S. Small Business Administration
This report is a companion to the more comprehensive study, the 1997 edition of Small Business Lending in the United States, also known as the "small-business-friendly banks" study.1. The small business lending study ranks 9,293 reporting commercial banks that provided small business lending data in their June 1997 "call reports" to federal banking regulators.
Micro-Business-Friendly Banks in the United States, 1997 identifies the micro-business-friendly lenders-banks with significant lending activity in loans of less than $100,000.
The 1997 study retains major features of the 1996 study-the use of four criteria to rank the small business lending activities of banks. The four variables are (1) the ratio of micro-business loans to total bank assets, (2) the ratio of micro-business loans to total business loans, (3) the dollar value of micro-business loans, and (4) the number of micro-business loans.
A total ranking for each bank is derived from the bank's rankings in the four categories. Scores are based on the decile or the tenth percentile in which the bank falls when ranked with other banks in the state.
Micro-business-friendly banks in each state are identified based on their total ranking (column 1 of the master table). Included in this micro-business-friendly listing are the top 10 banks or the top 10 percent in each state-whichever number is smaller.2.
It is difficult to say categorically which banks are best in lending to small or micro-businesses; these are the most micro-business-friendly banks given the limitations of the call report data.
Micro-Business-Friendly Banks in 1997
A total of 449 banks were identified as micro-business- friendly lenders in the United States in 1997 (Table A). These banks, holding just 3.4 percent of total commercial bank assets, had 13.2 percent ($14.8 billion) of the total value of micro-business loans outstanding in June 1997 (Table B).3.
The dollar amount of micro-business loans ranged from $4.1 million to $616.6 million in the 449 banks. Nineteen banks had more than $100 million in micro-loans outstanding in June 1997.
The micro-business-friendly banks' ratios of micro-loans to total assets ranged from 0.002 to 0.661, for an average ratio of 0.212 (compared with an average of 0.086 for all banks). Only nine of the banks had a ratio below 0.05.
| Bank Asset Size | ||
|---|---|---|
| < $100 million | 188 | 6047 |
| $100-$500 million | 235 | 2590 |
| $500 million -$1 billion | 15 | 292 |
| $1-$10 billion | 8 | 300 |
| > $10 billion | 3 | 64 |
| Total | 449 | 9293 |
| 449 Micro-Business-Friendly Banks | $138.9 | $14.8 | |
| All Banks | $4,046.4 | $112.2 | |
| MBF Banks as Percent of All Banks | 3.4% | 13.2% |
Note: Estimates for all banks include data from Keycorp. The micro-business-friendly banks' share of total banking industry micro-lending may be understated as a result. See footnote 3.
The ratios of the number of micro-loans to the number of business loans overall ranged from 0.12 to 1.0, for an average of 0.888 (compared with an average of 0.568 for all banks). Some 375 banks had a business loan portfolio of only micro-business loans, or a ratio of 1.0.
Micro-Business Lending in the United States, 1997
The most significant development in micro-business lending in 1997 was the large increase-almost 27 percent-in the number of micro-business loans between June 1996 and June 1997 (Table C and Chart).
While the number of the smallest loans increased significantly, the percentage increase in the dollar amount of these loans was less than it was for larger loans (Table D).
The dollar value of micro-business loans actually declined in the banks with assets under $100 million and between $1 billion and $10 billion (Table E). The number, total assets, and dollars in total business loans of these banks also declined.
But the number of micro-loans increased in all bank size groups, and in all cases, increases in the number of micro-loans exceeded increases in the dollar amounts, indicating a decrease in average loan size.
Explanations for this development may include
declining balances of older, larger loans on the books and/or
smaller new loans having been extended in the June 1996-June 1997
period.
| Loan Size | |||
|---|---|---|---|
| <$100,000 | |||
| $100,000-$250,000 | |||
| $250,000-$1 Million |
*Changes for 1996-1997 were calculated
without data for Keycorp. See footnote 3.
| Loan Size | |||
|---|---|---|---|
| <$100,000 | |||
| <$250,000 | |||
| <$1 Million | |||
| >$1 Million | |||
| Total |
*Changes for 1996-1997 were calculated without data for Keycorp. See footnote 3.
Note: Dollar amounts in nominal values,
not adjusted for inflation.
| Bank Asset Size | < $100 million | $100-$500 million | $500 million -$1 billion | $1-$10 billion | > $10 billion* |
| Micro-Loans ($) | -4.56 | 2.47 | 16.6 | -9.69 | 45.53 |
| Micro-Loans (#) | 1.57 | 12.53 | 17.41 | 21.72 | 74.76 |
| Business Loans ($) | -4.20 | 5.44 | 18.21 | -6.71 | 18.87 |
| Total Assets ($) | -5.73 | 1.82 | 13.08 | -8.03 | 19.02 |
| Number of Banks | -6.47 | 1.65 | 12.31 | -7.98 | -9.86 |
*Estimates for banks with assets over
$10 billion include data for Keycorp; therefore, some of the increases
in this category may be overstated. See footnote 3.
In very large banks, these increases may also reflect the expansion of small business credit cards and small credit line programs, which have been promoted in many multi-state banks over the recent past.
The Table: Micro-Business-Friendly Banks in the United States
The master table lists micro-business-friendly lenders in each state. Because of different banking structures in each state, as well as interstate differences in the number of banks, their size distribution, and demand for small business loans, the levels of micro-business lending for these top lenders differs greatly from state to state.
Explanation of Columns
Column 1, Total Rank. The total in the first column represents the bank's overall micro-business lending score within the state in which it is listed. The number is the sum of the four decile rankings found in columns 2 through 5. The best possible score is 40, which indicates that the bank is in the top decile-the top 10 percent-in each of the four variable categories. A total score of 4 indicates that the bank is in the bottom decile in each of the categories.
Column 2, Rank of the Ratio of Micro-Business Loans to Total Bank Assets (SSBL/TA). This column displays the bank's ranking in the state for the ratio of micro-business loans to total bank assets. A ranking of 10 means that the bank is in the top decile of all banks in the state.
Column 3, Rank of the Ratio of Micro-Business Loans to Total Business Loans (SSBL/TBL). The third column displays the bank's decile ranking for the ratio of micro-business loans to total business loans. A ranking of 10 means that the bank is in the top decile of all banks in the state.
Column 4, Total Dollar Amount of Micro-Business Loans Lent by the Bank (SSBL($)). This column shows the decile ranking of a bank's dollar value of micro-business loans outstanding. A ranking of 10 means that the bank is in the top decile of all banks in the state.
Column 5, Total Number of Micro-Business Loans Issued by the Bank (SSBL(#)). This column displays the bank's decile ranking for the total number of micro-business loans. A ranking of 10 means that the bank is in the top decile of all banks in the state.
Column 6, Bank Asset Size Class. Here the asset size class of the bank is defined.
Column 7, Ratio of Micro-Business Loans to Total Bank Assets (SSBL/TA). This column provides the ratio of micro-business loans to the bank's total assets.
Column 8, The Ratio of Micro-Business Loans to Total Business Loans (SSBL/TBL). This column displays the ratio of micro-business loans to the bank's total business loans.
Column 9, Total Dollar Amount of Micro-Business Loans Outstanding (SSBL($)). This column shows, for each bank, the dollar value in thousands of dollars of micro-business loans outstanding.
Column 10, Total Number of Micro-Business Loans Issued by the Bank (SSBL(#)). This column displays the total number of micro-business loans outstanding.
Column 11, Percentage Growth in Total Assets (TA97/96). This indicates the percentage growth of the bank's total assets from 1996 to 1997.
Column 12, Credit Card Banks. A double asterisk in this column means that the bank has a significant amount of business credit card activity. Many of the loans made by these banks may be credit card accounts to individual employees of large firms or credit card accounts to small firms. Because the call reports do not distinguish between these two types of loans, the summary total statistic in column 1 may be biased, making some banks appear more micro-business-friendly than they are. Thus, the double asterisk is a caution flag.
Small businesses seeking loans from small-business-friendly banks should also seek out banks that participate in the U.S. Small Business Administration's lending programs. If a bank participates in the SBA's loan programs and uses secondary markets extensively, the bank's ranking in this study may be artificially low. Banks participating in the SBA's Preferred or Certified Lender Programs should be considered small-business-friendly.4.
Limitations of the Study
It is important to note that the call report data tell only part of the story about lending to small business. Call reports do not reflect a major factor affecting a bank's ability to make loans to small businesses: the demand or lack of demand for small business loans. This phenomenon occurs on a regional basis. Banks in one area of a state may have a strong demand for small business loans, which increases their score in comparison with other banks in the state. Banks with a similar capacity to lend may have little or no demand for small business loans, resulting in a lower ranking.
In addition, some lending information may not be reported in the call reports or may not be discernible as small business lending. For example:
Despite these limitations, call report data provide sufficient information to present a fairly accurate picture of lending to small firms in the U.S. economy. And they are currently the only source of small business lending data available to the public.
Suggestions
>Suggestions on how to improve the study are welcome. Comments may be addressed to Dr. Charles Ou, Office of Advocacy, U.S. Small Business Administration, telephone (202) 205-6966 or Dr. Robert Berney, Chief Economist, telephone (202) 205-6875.
Written comments may be sent to: Office of Advocacy, U.S. Small Business Administration, Mail Code 3112, 409 Third Street S.W., Washington, DC 20416, or faxed to (202) 205-6928.
Accessing the Study
This study and its companion studies, Small Business Lending in the United States and The Bank Holding Company Study, are on the Office of Advocacy's site on the Internet's World Wide Web at http://www.sba.gov/advo/stats/lending/.
The studies are also available for purchase
on paper or microfiche from the National Technical Information
Service, 5285 Port Royal Road, Springfield, VA 22161, telephone
(703) 605-6000.
1. U.S. Small Business Administration, Office of Advocacy, Small Business Lending in the United States, 1997 ed., report no. PB97-141410 (Springfield, Va.: National Technical Information Service, 1997).
2. All banks with tied scores are included.
3. Keycorp informed the SBA of a discrepancy in their small business lending data that resulted in a significant overstatement of the dollar amount of small business lending. A correct report was not available for this publication. Because Keycorp data are included in the all-bank total, the aggregate dollar value may be overstated. Keycorp was not among the 449 micro-business-friendly lenders according to the criteria in this report.
4. "Preferred" lender status means that the bank has been given the full authority to guarantee SBA loans to qualified business owners without SBA review. Nearly 400 banks are preferred lenders. "Certified" lender status means that an SBA loan official will rely primarily on the bank's analysis. More than 1,000 banks have this status. To locate the nearest SBA Preferred or Certified lender, call the Small Business Answer Desk at 1-800-827-5722 or consult the SBA's home page at http://www.sba.gov.
5. "Recent Developments in Home Equity
Lending," Federal Reserve Bulletin, April 1998.
Click here for Micro-Business-Friendly Banks Tables
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Last Modified: 12-20-2000