Report: Small-business lending declines in 2010

With the Senate moving forward on small-business legislation this week, a new report shows lending and the amount of loans has declined this year, as hiring has remained flat and the smallest firms reduced hiring. 

The number of loans made to small businesses, which peaked at 27.2 million in the second quarter of 2008, has fallen by more than 4.8 million since then, a drop of 17.8 percent. The total value of those loans fell by $60 billion to about $650 billion, according to a report released Monday by the Joint Economic Committee (JEC) with data through May. 

The smallest businesses — those with fewer than 50 employees — had drops in hiring, even as large and mid-sized firms began to increase hiring in the middle of last year, the report said.

In the years leading up to the recession, small businesses hired an average of 44.4 million people each year. In 2008, that fell to 40.6 million, and it dropped even further in 2009 to 35.5 million workers, well below pre-recession levels. 

Small businesses employ about 65 percent of the nation's workers. 

The bill before the Senate would provide $12 billion in tax breaks and a $30 billion lending fund that is expected to improve access to credit for small businesses. 

Today's report, entitled "Small Business Employment: Bank Lending Restrains Job Creation," used an unpublished data series from the Bureau of Labor Statistics to update a May 2010 JEC report analyzing small-business hiring between January 2001 and March 2010. The update includes data through May. 

“Small businesses have been struggling to get the loans they need to expand and create jobs, as this report shows," said Rep. Carolyn Maloney (D-N.Y.), chairman of the JEC. "It is time for Congress to help small businesses get the lending they so desperately need to grow."