WASHINGTON — While credit unions were not included in the Small Business Administration's Small Business Economy: A Report to the President for 2007 because of their relatively new relationship with SBA, the agency said it is working harder to include credit unions in future reports.
The report reviews the economic environment for small businesses in 2006. One of the findings was that lenders with more than $10 billion in assets continued to increase their dominance in loans under $100,000 but remained "passive" with loans in the $100,000 to $1 million loan range, which is often seen as a "sweet spot" for many credit unions. In 2003, SBA opened its loan guaranty programs to credit unions. There are nearly 400 credit unions that are SBA lenders.
Still, because credit unions are not required to file certain reports such as Community Reinvestment Act reports, they are not included in the data SBA analyses, said John McDowell, press secretary for SBA's Office of Advocacy. The agency just added thrift data to the annual report, he added. Financial constraints and resources also limit SBA's ability to marry NCUA's data with other data used in the report.
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"It is important that policymakers fully understand how small business is financed and how changes in that market effect our economy," McDowell said. "Credit unions are a growing presence in small business finance and their impact should be considered when policy decisions are being made."
The report, released Dec. 19, also includes new research that focuses on minority- and veteran-owned businesses, social entrepreneurship, and pre-venture planning. Chad Moutray, chief economist for SBA's Office of Advocacy, said the data "shows that overall, small firms continue to drive a resilient U.S. economy."
As the economy continued to grow at a slower, but still healthy pace, total business borrowing increased from $562 billion in 2005 to $753 billion in 2006, the data showed. Borrowing by smaller, non-farm, non-financial businesses declined slightly, from $304 billion to $289 billion.
Meanwhile, small business credit continued to expand in 2006 because of "favorable economic conditions and a financial market with ample liquidity," according to the report. The most recent data available indicate that most small businesses used traditional credit, such as credit lines, loans, or capital leases for their business financing needs with the bulk of the increases coming from credit lines and credit cards.
The dollar amount of all small business loans outstanding increased 5.5%, from $601 billion in June 2005 to $634 billion in June 2006. Loans under $100,000 and loans from $100,000 to $1 million also increased by 5.5%.
One interesting finding from the report showed that lending to businesses by finance companies expanded in 2006, as business receivables outstanding increased by 4.0% from $479 billion to $498 billion. While lending companies continue to dominate the banking industry, SBA noted, lack of data by borrowing size "prevents further exploration into the distributions of loans to small and large businesses."
In other areas, Hispanics owned 6.55% of all small businesses followed by African-Americans at 5% and Asians and Pacific Islanders at 4.72%. Veterans represent about 14.5% of small businesses, the report showed.
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