Bank of America says it's lending more to small business
That Bank of America TV commercial featuring the Pink’s hot dog stand as a sign of its long history of lending to small business was cited in a Times article this week, and BofA wasn't exactly happy about it.
The article used the ads as an example of the chasm between big banks that tout their lending to small business, and the small-business owners who say they cannot get the loans they need to expand.
Loans to small business dropped 0.3% in the three months ended June 30, according to the SBA’s Office of Advocacy. But Bank of America’s small-business lending increased during that same period, according to bank spokesman Jefferson George.
George said Bank of America loaned $7.8 billion to U.S. small businesses in the first half of 2011, a 35% increase from the same period last year.
That number includes more than $1.2 billion in loans to small businesses in California, George said.
He conceded that bank lending is down overall from the days before the financial crisis, but said that is largely because there isn’t the same consumer demand.
"We're trying to make every good loan we can, but the interest isn't as strong as it had been pre-recession," he said. "The economy is challenging everyone, and we're seeing that in loan demand."
But, he said, the bank is hiring small-business bankers across the country to advise small businesses and help them grow their companies -- it aims to hire 1,000 by the middle of next year.
Already, George says, Bank of America’s loans have helped some businesses hire. One was Sliding Door Co. in Chatsworth. The company, which makes doors for closets, room dividers and offices, bought a 25,000-square-foot building, essentially doubling its space, and plans to add 20 employees in the next few years. The loan was a SBA 504 commercial real estate loan with Bank of America.
Loans made through the SBA are typically for borrowers who might otherwise have trouble getting a loan through traditional banks. The SBA guarantees a portion of the loan, making it more appealing to banks.
Mark Herter, chief executive of Farmers Insurance Group Federal Credit Union in Los Angeles, says it might make more sense for small businesses frustrated with the loan process to go to small banks and credit unions such as his.
"Many credit unions do small-business loans and are happy to consider 'smaller' loan amounts," he said. "That is our market."
Big companies go to big banks for loans -- small businesses having trouble finding financing should turn to credit unions, he said.
"When given a chance, a large bank commercial loan department will gravitate to larger loan application amounts than small ones. If GM wanted a loan, they would not consider a credit union," he said. "So the corollary should hold: When a small business wants a loan, it should knock on the door of a smaller lender such as a credit union."
-- Alana Semuels
Photo: A Bank of America sign in Virginia. Credit: Alex E. Proimos via Flickr