New York, NY (PressExposure) December 17, 2011 -- When are millions of dollars easier to get your hands on than thousands of dollars? Evidently, when securing a loan.
Small loans continued plugging along during the post-dot-com recession, but that hasn't been the case this time around.
Business loans of $1 million or less have been shrinking consistently for three years, most recently hitting a 12-year low of 1.5 million outstanding small loans, according a MSNBC investigative unit's analysis of FDIC data. Meanwhile, larger commercial and industrial lending by banks has increased for five straight quarters.
The trend stands in contrast to the recession and subsequent recovery period triggered by the dot-com explosion a decade ago, during which time small business lending kept growing despite significant declines in commercial lending, according to the report.
"It's usually the smaller business that is more able to bounce back and take advantage of different opportunities faster than a middle-market company," Linda O'Connell, manager of small business research at Minneapolis-based Barlow Research Associates, told the Investigative Reporting Workshop. "We haven't seen that."
So if small-loan seekers are running into trouble securing funding from traditional banks, where should they turn? According to a recent report from Biz2Credit, alternative lending institutions have been showing an increased affinity for small business financing, as credit unions and other alternative lenders approved 62 percent of funding requests in November, a slight increase from 61.8 percent in October.
Loan approvals by small banks also rose to 47 percent last month, their highest rate this year and an increase from 46.3 percent in October.
"The biggest story is the continued aggressiveness of credit unions in small business lending," Biz2Credit CEO Rohit Arora said in a statement. "National Association of Federal Credit Unions (NAFCU), reported that credit unions upped loan-making by 4.5% in the 12 months ending in June 2011, and we have seen increases in subsequent months."