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Government Report Shows Downward Trend in Small Business Lending

Small Business Lending Drops by 453 billion

Even as the economy showed signs of recovery in the wake of the Great Recession, lending to small businesses contracted last year, while large businesses received more loan dollars, a new government study shows.

In the year ended June 2011, banks had $606.9 billion in outstanding loans to the nation's small businesses, down 6.9 percent, compared with $652.2 billion for the same 12-month period ending in June 2010, according to the recent annual report on small business lending by the Small Business Administration Office of Advocacy. 

Small business lending has been declining since June 2008, when banks had $711.5 billion in loans outstanding to small businesses. The report noted that this trend is in part because banks are afraid to lend to smaller businesses and fewer companies are applying for loans.

Related: 3 Signs You May Need to Ditch Your Bank

"As economic uncertainty persists, capital markets serving small businesses remain cautious about providing more capital, while small businesses are hesitant to acquire more debt," writes Victoria Williams, the author of the study and from the Office of Economic Research at the SBA Office of Advocacy.

Meanwhile, loan dollars for large businesses rose by 5.8 percent during the 12 months ending June 2011, compared with the previous year.

The report is based on data from banks' Call Reports and from Community Reinvestment Act Reports. Loans made to businesses for less than $1 million are assumed to be going to small businesses.

Related: What the IPO Market Revival Means for Start-Up Funding

Have you tried to get a loan for your small business recently? What was your experience? Leave a comment below.  

Catherine Clifford is a senior writer at Entrepreneur.com.

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