Kentucky is home to more than 300,000 small businesses
WASHINGTON (July 24, 2012) — Overall lending to small businesses decreased last year, as borrowers and lenders continued to postpone new borrowing and lending in reaction to an uncertain economy, according to a recent study by the Small Business Administration Office of Advocacy.
The SBA conducts the small business lending study each year to examine the lending environment of depository lending institutions and inform prospective lenders, policymakers, business owners and lending institutions of developments in the small business loan markets. It relies on two types of data reported by depository institutions to their regulatory agencies and made available for analysis—The Call Report data and the Community Reinvestment Act (CRA) Reports.
“Small businesses are a source of economic strength to the nation; they generate more than half of the non-farm private GDP, but their survival is contingent on their access to credit,” the study says.
While business lending in amounts of more than $1 million turned upward in 2011, small business lending under $1 million remained restrained. Small business loans outstanding in June 2011 were valued at $606.9 billion, down 6.9 percent from $652.2 billion the previous year, the study found. The dollar volume of borrowing by large corporations in loan sizes over $1 million increased by 5.8 percent in 2011, compared with an 8.9 percent drop in 2010.
[pullquote_left]Small businesses totaled 333,057 in Kentucky in 2009.[/pullquote_left]
“Financial market conditions in the first half of the year were to some extent supportive of economic growth. The U.S. economy continued to recover and improved moderately during the second half of 2011 as some economic indicators turned upward, yet lending to small firms by U.S depository institutions remained weak,” the study reports.
Borrowing declined for both types of small business loans — commercial real estate and commercial and industrial loans under $1 million — but at a slower rate for commercial real estate, the study found. The value of the smallest commercial and industrial business loans or micro loans (less than $100,000) declined by 12.7 percent, from $137.2 billion in June 2010 to $119.8 billion in June 2011. Commercial real estate and commercial and industrial micro loans combined were valued at $139.5 billion in 2011.
Megabanks — those with $50 billion or more in assets — accounted for 38 percent of small business loans outstanding and for 51 percent of the total decline in small business loans. The number of multi-billion-dollar lenders with assets over $10 billion was down from 94 in June 2010 to 92 in June 2011. Their share of total assets, however, grew from 76.7 percent to 77.3 percent during the same period, according to the study.
The Community Reinvestment Act data on small business lending mirror the results in the Call Report data. In 2010, 774 CRA-reporting institutions extended 4.3 million loans of less than $1 million, for a total of $178.8 billion in small business loans; this compares with a 2009 total of 6.2 million loans valued at $205.7 billion made by 799 depository lending institutions.
Kentucky’s small businesses
Small businesses totaled 333,057 in Kentucky in 2009, the latest year for which data is available. They represent 96.7 percent of all employers and employs 48 percent of the private-sector workforce.
Most of the state’s small businesses are very small; 79.2 percent of them did not have employees and most employers had fewer than 20 employees.
Small business employed 714,275 workers in 2009, with the most employment coming from firms with 20 to 499 employees.
Self-employment in Kentucky has declined over the past decade, and throughout 2010, the number of establishments that opened was lower than the number that closed.
Download the full report, Small Business Lending in the United States.