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New initiatives expected to spur small business lending

Feb 01, 2013 Missy Rogers

Small business lending fell substantially in September 2012, but the problem seems to have rectified itself since then - thanks in large part to some government initiatives.

Nearly 300 banks throughout the United States have joined the Small Business Lending Fund (SBLF) program, according to a recent HartfordBusiness.com report. The initiative aims to encourage short term lending growth to companies that make $50 million or less annually.

"It provided us with a level of confidence in challenging economic times to go ahead and make loans to small businesses," Richard Cantele Jr., president and CEO of Salisbury Bancorp, told the news source.

Of the 281 banks nationwide that joined the initiative, 84 percent have increased their lending by a combined $7.4 billion. Cantele Jr.'s bank is among three in Connecticut to participate in the SBLF program so far - and the three institutions have upped their lending 77 percent.

In the New York City area, banks gave out nearly 2,000 loans - totaling $723 million - in 2012, according to a recent Crain's New York Business Report. Pravina Reghavam, district director of the region's Small Business Administration, said that both these marks were the state's "second-highest ever."

Small business lending trending upward
Short term lending bounced back in the last few months of 2012, and recent reports indicated that that trend could continue in 2013. November's Reuters/PayNet Small Business Lending Index (SBLI), for example, reported a significant improvement compared to September's 14-month low.

"Now that some of the economic uncertainty of 2012 has been resolved, we hope to see better trends for small business growth," said Terry Robinson, President of The Lending Circle and Sunovis Financial. "Certainly there will be bumps in the road, but we feel the overall trend for small business lending is on an upward trajectory."

The study found that November's SBLI was more than 24 points higher than September, with capital formation increasing for its third straight year. Many experts are predicting this growth will continue in 2013, according to the report.

An earlier study by Biz2Credit revealed that this confidence is justified, with big banks approving nearly 15 percent of small business loans in December 2012. This marked a 13 percent increase from November and a nearly 10 percent year-over-year growth. Meanwhile, small banks and credit unions approved nearly half of small business loans in December 2012, while approval rates by alternative lenders hovered around 64 percent.