Small businesses in the United States account for about 29 million companies, which translates to a large contribution to the national economy. In fact, about 64% of all new jobs were created in small businesses between 1993 and 2008. However, many economists believe that part of the global economic crisis that began in 2007 was a result of defaults on small business loans.
The Small Business Lending Situation
Two years later, how are major banking institutions treating small businesses, and are they extending loans to the largest employer sector in the country? The answer is yes.
In 2009, major banks did manage to make small business lending a priority, and it appears they will continue to do so in 2010, according to a study sponsored by Fox Business. Bank of America and Wells Fargo were the leaders in small business lending in 2009 with $12 and $13 billion respectively. B of A did disclose that they wrote off $2.5 billion in loan losses due to defaults, but were working to modify about 49,000 loans.
Wells Fargo said that small business lending is doing so well they hired 5% more additional banking staff for a total of 31.500, and the bank plans to hire 700 more staff members in 2010.
JP Morgan Chase said they extended $6 billion in loans to small business in 2009, and they plan to increase that amount by 67% in 2010 to $10 billion.
The Power of Small Businesses
A small business is defined as a firm with annual sales of less than $20 million. Although Fortune 500 corporations tend to dominate the news with Federal bailout funds, it is the small business sector that helps make the country run at its optimal financial level.
Small business in the U.S. cannot be discounted as a major economic contributor. As the largest employer in the country, small business is a key factor to the economic recovery. And major lending institutions have taken note. Look for new legislation to be passed in 2010 that will make it even easier for lenders to extend loans to small business.