Bank loans to small business fall to 12-year low

New federal data show that the number of small bank loans to business has fallen to the lowest point in more than a decade, cutting the flow of money to a sector that's usually a job-creation powerhouse.

"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," said Linda O'Connell, manager of small business research at Barlow Research Associates, a Minneapolis market research firm that focuses on the financial industries. "We haven't seen that."

An analysis of recently released Federal Deposit Insurance Corp. data by the Investigative Reporting Workshop shows that overall commercial and industrial lending by banks has increased for five straight quarters, but small loans to business of $1 million or less have been shrinking consistently since June 2008. As of Sept. 30, total outstanding loan volume was down 14.7 percent from its peak. More...