The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.
- BLS Handbook of Methods
- Bureau of Economic Analysis
- Bureau of Labor Statistics
- Congressional Budget Office
- Economic Data - FRED® II, St. Louis Fed
- Office of Management and Budget
- Statistics: Releases and Historical Data, Board of Governors
- U.S. Census Bureau Economic Programs
- White House Economic Statistics Briefing Room
October 04, 2012
Trends in Small Business Lending
The Atlanta Fed's latest semiannual Small Business Survey is active through October 22, 2012. If you own a small business and would like to participate, send an e-mail to SmallBusinessResearch@atl.frb.org.
In our previous survey conducted in April 2012, we found that firms applying for credit at large national banks had notably less success than firms that applied to small banks.
We also found that the firms applying to large banks tended to be much younger than the firms that applied to small banks. We speculated that this "age factor" could be contributing to the lower overall success rates at large banks.
A difference between small businesses' success at large and small banks has also been documented by the online credit facilitator Biz2Credit. Biz2Credit works a bit like an online dating service—after answering a series of questions (and providing the typical financial documents required by lenders), small businesses are presented with five potential "matches." To determine the best five matches, Biz2Credit identifies what lenders are looking for—usually a certain credit score, a minimum number of years in business, an established banking relationship, and targeted industries.
The resulting credit applications are the basis for the Biz2Credit Small Business Lending Index. Biz2Credit also reports approval rates from the matching process for large banks, small banks, credit unions, and alternative lenders. These approval rates are plotted on the chart below.
Much like we saw in the Small Business Survey, Biz2Credit reports that small firms have had consistently less success in obtaining credit at large banks.
Confirming our results encourages us that our April observation was a good one. But confirmation isn't explanation—what accounts for the different experiences small businesses have in securing credit from small banks versus big banks? And so, we dig deeper.
Note: According to Biz2Credit, its index is based on 1,000 of the 10,000-plus applications submitted each month. To be included, the business has to have at least a 680 credit score, be at least two years old, and have an established relationship with the bank to which it is applying. Selection methods are also applied to provide for national representation.
By Ellyn Terry, senior economic research analyst at the Atlanta Fed
TrackBack URL for this entry:
Listed below are links to blogs that reference Trends in Small Business Lending:
- Can Two Wrongs Make a Right?
- Are People in Middle-Wage Jobs Getting Bigger Raises?
- GDPNow and Then
- What's behind the Recent Uptick in Labor Force Participation?
- Is the Number of Stay-at-Home Dads Going Up or Down?
- Labor Force Participation: Aging Is Only Half of the Story
- Putting the MetLife Decision into an Economic Context
- The Rise of Shadow Banking in China
- Which Wage Growth Measure Best Indicates Slack in the Labor Market?
- Collateral Requirements and Nonbank Online Lenders: Evidence from the 2015 Small Business Credit Survey
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- November 2015
- October 2015
- September 2015
- August 2015
- July 2015
- Business Cycles
- Business Inflation Expectations
- Capital and Investment
- Capital Markets
- Data Releases
- Economic conditions
- Economic Growth and Development
- Exchange Rates and the Dollar
- Fed Funds Futures
- Federal Debt and Deficits
- Federal Reserve and Monetary Policy
- Financial System
- Fiscal Policy
- Health Care
- Inflation Expectations
- Interest Rates
- Labor Markets
- Latin America/South America
- Monetary Policy
- Money Markets
- Real Estate
- Saving, Capital, and Investment
- Small Business
- Social Security
- This, That, and the Other
- Trade Deficit
- Wage Growth