Looking for a little extra expansion capital? You couldn't have picked a better time. According to a report by the U.S. Small Business Administration's Office of Advocacy, bankers are lending money to small business like never before. Some $15.8 billion was lent to small businesses last year by the 478 banks in the SBA's new ranking of the top microlenders. "That's a 5 percent increase over 1995 and is a good indicator that credit is more available than it has ever been," says Jere Glover, chief counsel for the Office of Advocacy, which compiled and published the Micro-Business-Friendly Banks in the United States, 1996 Edition report.
Glover cites a number of reasons for the lending increase. "A lot has to do with an increase in lending to women," he says. "More women are starting businesses, and bankers are beginning to realize they are good loan risks."
The SBA's LowDoc program, which encourages banks to make small loans with reduced paperwork, is at the center of another change, adds Glover. It showed bankers that it's cost-effective to make such microloans (which are less than $100,000). Now banks are taking the initiative and making these loans on their own.
The study used three new criteria to rank the top microbusiness-friendly banks. Consequently, a broader view of the lending climate is presented.
"The old ranking system favored very small banks. Now we're using four factors that give a more balanced view," explains Glover. As a result of the new evaluation criteria, 20 larger banks were included in this year's study.
The four variables measured are: 1) micro-business loans-to-assets ratio, 2) microbusiness loan-to-total-business-loan ratio, 3) dollar volume of microbusiness loans, and 4) total number of microbusiness loans.
Armed with the study's information, says Glover, you can find the banks in your community that have made microloans in the past-and will be more likely to do so in the future.
Karen E. Spaeder is a freelance business writer in Southern California.