Business Loans Hard To Get In 2009-10

WASHINGTON (TheStreet) -- Bank lending to small businesses continued to decline in 2009 and 2010, but there were some signs of stabilization, according to the Small Business Administration.

Lending to small firms fell by $43 billion, or 6.2%, to $652.2 billion, compared with lending to large firms, which fell by 8.9% during the June 2009 to June 2010 period, according to a report issued Thursday by the SBA's Office of Advocacy.

Small-business loans are down 8.3% from the 2008 height of $711 billion, the report said.

The overall pace of borrowing and lending for the small-business market was much weaker than in the previous year. Large banks were particularly closefisted with their money, representing a significant portion of the lending decline, the report said.

The SBA compiled data for its latest report, Small Business Lending in the United States, 2009-2010, from information gathered by the Federal Deposit Insurance Corp. through call reports through June and Community Reinvestment Act reports for 2009. Small-business lending is defined by commercial real estate and commercial and industrial loans under $1 million.

As gross domestic product improves, business lending is likely to follow the pattern seen in past recessions, where commercial and industrial lending rose only after a recovery was well underway, the SBA said.

"Businesses and lenders continued to exercise caution in borrowing and lending through 2009-10," Winslow Sargeant, the SBA's chief counsel for advocacy, said in a report. "As the economy improves, this study, through its state-by-state display of lender performance, can help both small-business borrowers and lending institutions see where small firms are beginning to find the capital they need."