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MCBC releases new expanded report on 2007 small business lending

Posted March 16th, 2009 by massbanking
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For the report, click here.
 
 

Massachusetts Trails New England and the U.S. in

Small Business Loan Growth 

Report Shows Persistently Lower Small Business Lending Rates

In the State’s Low Income and Minority Areas 
 
 

Boston, March 4, 2009.  The Massachusetts Community & Banking Council (MCBC), a coalition of community organizations and financial institutions, has issued its tenth consecutive report on small business lending patterns.  The report, Small Business Lending in Massachusetts, 2004-2007, includes data on small business lending across the state and the impact of small business lending on the state’s overall economy.  The report also focuses on small business lending in low-income and traditionally underserved areas.  The report analyzes lending data collected under the Community Reinvestment Act (CRA) for year ended December 31, 2007 and provides comparisons to 2004 through 2006 lending data.  In addition to the data in the report, MCBC is also providing data on all Massachusetts cities and towns in a set of on-line tables.  The report was prepared for MCBC by Stuart Ryan of BankMaps LLC. 

“These are challenging times in our economy, and small businesses face some of the greatest challenges of all,” notes Esther Schlorholtz, senior vice president at Boston Private Bank & Trust Company and co-chair of MCBC’s Economic Development Committee.  “Since 2007, the period covered by this report, we experienced a significant slow-down in the economy and businesses are finding it difficult to access capital.  It is essential that lenders, government officials and technical assistance providers continue to support small businesses as they create a significant number of jobs and offer important services in our communities.  A study such as this one helps us to better understand how small businesses access capital and identify areas where greater intervention is needed.” 

Among the report’s important findings: 

Loan Volume 

  • The number of small business loans in Massachusetts increased 2.5 percent from 2006 to 2007 and the dollar amount of loans increased 5.1 percent during the same period.  However, Massachusetts trailed the rest of New England and the country as a whole in small business loan growth.
  • Small business loans with an original amount of $100,000 or less accounted for 97.1 percent of the total number of loans in Massachusetts and 47.2 percent of the dollar amount of loans.
  • Loans to businesses with revenues of $1 million or less accounted for just over one-third of the total small business loans reported in Massachusetts in 2007.

 

 

Geographic Distribution 

  • Businesses in Middlesex County accounted for most of the statewide growth in 2007 in small business loan dollars.  Barnstable, Dukes and Nantucket Counties reported overall declines in small business loan dollars.

 

 

Lenders 

  • A total of 175 lenders reported small business loan activity in Massachusetts in 2007, including 47 lenders that are either headquartered in Massachusetts or have a substantial presence in the state.
  • Massachusetts-based lenders reported a total of 24,945 small business loans in 2007 for $3.2 billion, representing 8.1 percent of the total number of small business loans in the state and 57.9 percent of loan dollars.
  • Massachusetts banks accounted for 90.0 percent of the dollar volume of larger small business loans ($100,000 to $1 million), while accounting for just over one-third of loan dollars for smaller loans (less than $100,000).
  • Credit card lenders accounted for an estimated 87.8 percent of the number of reported small business loans and 31.8 percent of small business loan dollars over the past four years.

 

 

Lending in Traditionally Underserved Areas 

  • Lower income areas in Massachusetts experienced an overall decrease of 0.5 percent in small business loans dollars from 2006 to 2007 while higher income areas experienced an overall increase of 6.5 percent.  An estimated 23.2 percent of businesses in the state, both large and small, are located in lower income areas.
  • In each of the past four years, the lowest rates of lending to firms in Massachusetts were in low-income census tracts while the highest rates were generally in either middle- or upper-income census tracts.
  • In each of the past four years, low- and moderate-income minority communities in Massachusetts have reported lower rates of lending than low- and moderate-income white communities.

“The study reaffirms what we hear anecdotally during our Small Business Town Meetings, that many owners believe that the way to deal with cash flow needs is to use their personal credit cards or open personal lines of credit,” said Andre Porter, executive director of the Massachusetts Office of Small Business and Entrepreneurship.  “It is important that we continue to inform small business owners of the resources available to grow their businesses so that they are aware of the variety of financial products for which they can apply.” 
 

About the Massachusetts Community & Banking Council 

The Massachusetts Community & Banking Council (MCBC) was established in 1990 to bring together community organizations and financial institutions to affect positive change in the availability of credit

and financial services across Massachusetts by encouraging community investment in low- and moderate-income and minority group neighborhoods and providing research, other information, assistance and direction in understanding and addressing the credit and financial need of low- and moderate-income individuals and neighborhoods. 

MCBC is funded through the financial support of member banks.  MCBC’s 2008 bank members include: Avidia Bank, Avon Co-operative Bank, Bank of America, Bank of Canton, Benjamin Franklin Bank, Boston Private Bank & Trust Company, Braintree Cooperative Bank, Central Bank, Chelsea-Provident Co-Operative Bank, Citi, Citizens Bank, Dedham Institution for Savings, Eagle Bank, East Cambridge Savings Bank, Eastern Bank, Everett Co-Operative Bank, Fiduciary Trust company, Hyde Park Co-operative Bank, Hyde Park Savings Bank, Mt. Washington Bank, North Cambridge Co-operative Bank, Sovereign Bank, State Street Corporation, StonehamBank, TD Bank, The Bank of New York Mellon Corporation and Wainwright Bank. 

In 2006, in collaboration with the Commonwealth of Massachusetts, the Massachusetts Bankers Association and the Massachusetts Small Business Assistance Advisory Council, developed Banking Partners, a new small business loan program which brings together banks and non-profit technical assistance providers that offer counseling and training to improve access to financing by very small businesses.  To date, 25 Massachusetts banks have joined Banking Partners. 

Small Business Lending in Massachusetts, 2004-2007 and other MCBC reports and information about Banking Partners are available on MCBC’s website at www.mcbc.info.