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Small Business lending

Global Small Business Lending Slow

December 1, 2011 by Zack Duncan Leave a Comment

the worldIt is obvious that lending to large companies is increasing steadily across the entire world. However, as lending grows for big businesses, it only shrinks for small and medium-sized businesses as they struggle to obtain financing. A new paper from Omega Performance entitled Maximizing Results, Minimizing Risks examines the reasons for the reluctance of financiers to lend to small and medium-sized businesses and what the financial services industry needs to help this sector stay funded.

In addition to that, the paper looks at the recent history of lending, the circumstances that led to the financial crisis of 2007 and the banking industry’s current efforts to avoid those same mistakes. According to President and CEO of Omega Performance John Golden, “Because there is no useful credit risk transfer option for smaller loans, lending institutions know that they can’t trade out of a loan and instead must bear the entire risk.”

Golden added, “The temptation is for banks to steer clear of multiple, harder-to-understand small and middle market loans in favor of fewer larger, but safer, credits. This bias toward large organizations might minimize the risks for financial institutions in the near term, but it limits growth in the long term.”

The state of banking in a total of six countries is highlighted in a series of videos on banking in Australia, Canada, China, Singapore, the United Kingdom and the United States and the paper, executive summary, podcast and all videos can be accessed on Omega Performance’s website.

Omega Performance equips companies with the credit skills to source and structure high-quality, profitable loans in order to help grow a more profitable, lower-risk loan portfolio. Omega Performance has provided training to more then 2 million people in more than 2,500 financial services organizations around the world since 1976.

Source: The Sacramento Bee – Small Business Lending Still Sluggish on Global Level

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Posted in: SMB Tagged: global small business lending, global small business news, Small Business lending, small business news

Have the Big Banks Followed Through with Their Promises?

November 10, 2010 by Katie Sellers Leave a Comment
small business lendingMany big banks claimed that they would increase credit to small businesses in 2010, but have they really done this so far? Are they really lending more money to small businesses or have they fallen through? Well, it’s a little difficult to tell due to the fact that “small business lending” for most banks usually covers a variety of different things ranging from real estate to credit cards, and there are very few lenders that separate their numbers for small businesses. Big banks were under pressure from the White House last year to increase credit. Some of the nation’s largest lenders, including Wells Fargo, Bank of America, and JPMorgan Chase, made some very big promises about increasing their lending to small business lenders in 2010. Four of the companies that set some concrete goals were asked how they were doing so far with their lending, and here is what they said.

Wells Fargo
According to Wells Fargo spokeswoman Sarah Toffoli, the company gave more than $2.9 billion in new loans to small business owners in the first quarter. The bank said that their goal for 2010 was to lend $16 billion, which is about $3 billion more than they lent in 2009, to companies with less than $20 million in revenue. “Based on the seasonality of business lending and the anticipation of an improved economy, we hope to meet our commitment by the end of 2010,” said Toffoli. John Stumpf, the chairman of Wells Fargo, says that the company plans to increase the new small business lending of $16 billion in the company’s annual report.

JPMorgan Chase
JPMorgan Chase reported in their first quarter earnings release that so far this year they have lent small businesses over $2.1 billion in new loans. They had said that their goal was to give out $10 billion in new credit to companies with revenues under $20 million. Their goal, which was announced November 9th, 2009, is an increase of $4 billion over last year. Spokesman Tom Kelly said that the bank’s first quarter lending to small businesses has increased 31% over the lending from the first quarter of the previous year.

Kelly also said that since November 9th, JPMorgan Chase has hired 235 new small business bankers, and they plan to hire 325 new employees by the end of 2010. Another interesting fact to note is that Chase has lent more than $110 million in “second-look loans” this quarter. Second-look loans are small business loans that are given to borrowers who were initially rejected but asked for Chase to review their loan application again.

Bank of America
In their first quarter Bank of America has loaned $19.4 billion to small and mid-size businesses, those who have less than $50 million in revenue. When taking out the loans to mid-size businesses, the bank has loaned $3.4 billion to small companies, those with less than $20 million in revenue, during their first quarter.

At a meeting with President Obama on December 14th, 2009, the then CEO of Bank of America Kenneth Lewis stated that the bank planned to increase their lending to small and mid-size businesses in 2010 by $5 billion. As of right now the bank has not released how much money they lent to small and mid-size businesses in 2009, so there is really no way to set a number on how much they will be lending in 2010 or on how much progress they have made this quarter towards meeting their goal for 2010. Spokesman Jefferson George said that the bank is currently running those numbers, and they hope that they will be able to make those numbers available soon.

Huntington National Bank
Huntington National Bank is a regional bank for the Midwest that is currently based out of Columbus, Ohio. In February they set a goal to increase their lending to small businesses, businesses with less than $15 million in revenue, by $400 million. Right now the bank says that numbers documenting progress towards their goal of lending $1.2 billion in 2010 are not available. Their spokeswoman LuJean Smith did say though that Huntington has currently hired more than fifty percent of the 150 new employees that they plan on hiring.

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Tagged: business loans, Save Your Small Business, small business, Small Business lending, small business loans, SMB

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