While small business lending as a whole has increased since the Great Recession, fewer banks and thrifts are engaged in the market, according to a recent report from the Consumer Financial Protection Bureau.
From before the Great Recession through 2017, the total number of thrifts, community banks, and large banks engaged in small business lending have declined. However, the number of credit unions offering small business lending products has roughly doubled since 2004, from 10 percent to 20 percent.
Other than credit unions that offer small business lending products, the number of other traditional institutions offering small business lending declined by at least 25 percent between 2004 and 2017. Lending from banks to small businesses increased from $308 billion in 1994 to $659 billion in 2008, but then fell 18 percent down to $543 billion by 2011, according to findings from the Small Business Administration.
One changing factor is the growing presence of fintech lenders in the small business lending arena. Estimates by S&P found that five large fintech lenders who focus on that focus on small and medium enterprise businesses — OnDeck, Kabbage, Credibly, Square Capital and PayPal Working Capital — originated $6.5 billion of loans in 2017. That number is still only a small percentage of the $1.4 trillion in small business lending that the CFPB estimated was outstanding in 2017, the report noted.
The number is likely much higher today, with a recent Federal Reserve survey showing that a growing number of small businesses turn to online lenders, up from 19 percent in 2016 to 32 percent in 2018.
After the Great Recession, there was an increase in small business lending but there has been substantial variation by county and state, unlike the uniform decrease in such lending during the Great Recession. States on the East Coast and in the South recovered at a faster rate than those in the Great Plains and West.
Following the Great Recession, small business lending has increased, but lenders in the median county still made only one-half the number of small business loans per business in 2017 as they had made in 2004.
According to the SBA Office of Advocacy, there were approximately 30 million small businesses employing just under 48 percent of all U.S. employees in 2017. They generated about 62 percent of net new private sector jobs since the Great Recession, consistent with numbers over the last quarter-century.
The report draws on data from the Community Reinvestment Act on small business lending at the county level from 2004-2017 and Census data on the number of employer and non-employer firms.