Financing for SMEs appears to be recovering from the immediate post-recession years.
However, the more traditional sources of SME capital – banks for loans and VCs for early-stage funding – are focusing on larger and less nascent companies. A number of instances and new delivery methods are taking their place, from online micro- and small business lenders to supply chains finance programs, angel investors, and crowdfunding platforms.
The summary highlights of this report are as follows:
Bank lending to SMEs has improved, but has yet to return to pre-crisis levels. In June 2013, the loan balances for commercial and industrial (C&I) loans of $1 million or less stood at $288.7 billion, $47 billion below June 2008.
Federal government sources have played a complementary and to an extent countercyclical role during the past few years in SME lending. In FY 2013, SBA supported $29.6 billion in lending to small businesses, about the levels of the prior two years. The Export-Import Bank supported export credit insurances and export working capital for SMEs at $5.2 billion in 2013, somewhat below 2011-12 authorizations.
The burgeoning market of online lenders has yet to be analyzed fully, but the success of several platforms indicates a new, strong, and relatively affordable source for financing particularly for small firms that lack access to sufficient bank credit.
TradeUp, January 2014 33
Expansion- and Late-stage investments together accounted for $13.4 billion of VC investments through Q1-Q3 of 2013. Seed- and Early-Stage investments attracted 46 percent less investments during the same time period amounting to a total of $7.2 billion.
The Software industry continues to garner the most VC dollars in the United States, while Silicon Valley continues to dominate the US VC investments by geography, leading the pack with 42 percent investments in 2013. Internationally, Israel and United States remain the hotbeds of innovation with the highest VC spending as a percent of GDP among the OECD countries in 2012.
Angel investment is recovering and has become a strong complement to VC financing. In the first two quarters of 2013, angels invested a total of $9.7 billion, an increase of 5.2 percent over the first half of 2012 and 5 percent increase form 2007.
Global crowdfunding volume nearly doubled in 2012 to $2.7 billion, of which over one-half, or $1.6 billion, was in North America. Crowdfunding is expected to exceed $5 billion in 2013.
As the U.S. economy recovers, 2014 appears to become a big year for alternative lenders and investors on the online and crowdfunding spaces, and see their expansion also to mobile
platforms. However, bank financing to SMEs is expected to continue subdued as Basel III capital adequacy requirements come into effect in 2015. Because banks will have to hold additional cash in reserve to meet the terms of Basel III, they will have less money to lend compared to pre-crisis levels, which is expected to have a disproportionately negative effect on SME financing
opportunities. This however will open up opportunities for new business models to accommodate the recovering financing demands by American SMEs.
TradeUp, January 2014 34 APPENDIX I:
Small Business Lending of Large Lending Institutions Based on Call Report Data, June 2012
Name of Lending Institution
HQ StateRankTA Ratio1TBL Ratio1Amount ($1,000)Number Lender Asset Size Amount ($1,000)Number Amount ($1,000)Number
CC Amount/TA1 (1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11) American Express Co. NY10.2381.00016,350,038 3,603,226 >$50B 16,318,089 3,603,088 31,949 138 0.28 First Citizens BancharesNC 20.1870.4913,914,507 117,702 $10B-$50B 378,394 105,081 3,536,113 12,621 . Wintrust Financial Corp.IL30.1690.3842,842,793 136,801 $10B-$50B 800,526 126,455 2,042,267 10,346 0 Zions BancorpUT40.1180.2616,231,770 52,612 >$50B 526,206 32,973 5,705,564 19,639 0 Synovus Financial Corp.GA50.1620.3814,227,168 22,675 $10B-$50B 539,666 9,593 3,687,502 13,082 0.01 BB&T Corp. NC 60.0530.2539,408,732 506,879 >$50B 1,922,393 473,449 7,486,339 33,430 0 FNB Corp. PA 70.1280.4161,475,506 25,011 $10B-$50B 247,853 17,810 1,227,653 7,201 . Capital One Financial Corp.VA 80.0280.3169,105,726 2,914,573 >$50B 5,872,601 2,900,077 3,233,125 14,496 0.25 Fulton Financial Corp. PA 80.1290.3482,133,209 20,080 $10B-$50B 187,652 9,909 1,945,557 10,171 . Regions Financial Corp.AL100.0610.2197,386,970 63,394 >$50B 1,617,601 41,677 5,769,369 21,717 0.01 U S Bancorp.MN110.0420.20514,632,161 870,931 >$50B 4,859,559 828,856 9,772,602 42,075 0.05 First Niagara Financial Grp. NY110.0720.2882,530,706 32,530 $10B-$50B 446,838 23,841 2,083,868 8,689 . Lauritzen Corp. NE130.0710.3371,142,096 101,941 $10B-$50B 501,648 97,542 640,448 4,399 . Huntington Bancshares Inc.OH130.0690.2223,914,846 34,732 >$50B 635,757 20,531 3,279,089 14,201 0 Bancorpsouth Inc.MS150.1250.4041,646,169 15,882 $10B-$50B 206,856 9,441 1,439,313 6,441 . TCF Financial CorpMN160.0940.3701,676,064 19,823 $10B-$50B 300,863 11,240 1,375,201 8,583 0 GE Capital Retail Bk* UT170.0421.0001,133,624 716,231 >$10B 1,133,624 716,231 - - . JPMorgan Chase & CoNY180.0190.21925,003,294 2,893,892 >$50B 13,410,165 2,836,551 11,593,129 57,341 0.06 CitigroupNY190.0130.2629,081,426 1,746,916 >$50B 5,587,076 1,732,920 3,494,350 13,996 0.1 Popular PR190.0710.2582,464,690 22,703 $10B-$50B 164,682 11,809 2,300,008 10,894 0.03 Hancock Holding CompanyMS190.0920.2991,775,410 18,706 $10B-$50B 194,239 11,452 1,581,171 7,254 0 M&T Bk CorpNY220.0680.1785,560,491 56,151 >$50B 1,087,373 37,405 4,473,118 18,746 0 Bank of Amer CorpNC 230.0200.18231,042,181 3,277,274 >$50B 14,191,509 3,220,135 16,850,672 57,139 0.07 Central BancompanyMO240.1100.3891,113,344 14,445 $10B-$50B 148,800 10,113 964,544 4,332 . Arvest Bk Grp. AR250.0860.3451,167,974 14,601 $10B-$50B 173,673 9,471 994,301 5,130 . Compass BkAL260.0490.1723,445,358 169,539 >$50B 613,869 158,533 2,831,489 11,006 0.01 Wells Fargo & CoCA270.0290.14634,570,389 617,508 >$50B 8,416,000 510,097 26,154,389 107,411 0.01 PNC Financial Svc. GroupPA 280.0360.14310,537,942 220,200 >$50B 2,103,528 184,380 8,434,414 35,820 0.01 Bank of The West CA290.0470.2093,645,716 38,919 >$50B 592,967 28,097 3,052,749 10,822 0 BMO Harris Bank NAIL300.0420.2013,849,439 46,887 >$50B 424,404 33,066 3,425,035 13,821 0
All Small Business Lending (less than $1 million)Micro Business Lending (less than $100,000)Macro Business Lending ($100,000-$1million)
TradeUp, January 2014 35
Name of Lending InstitutionHQ StateRankTA Ratio1TBL Ratio1Amount ($1,000)Number Lender Asset SizeAmount ($1,000)Number Amount ($1,000)Number
CC Amount/TA1 (1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11) Umpqua HCOR310.1100.2551,264,035 9,351 $10B-$50B 97,474 4,764 1,166,561 4,587 . T D Bk NADE320.0300.1926,197,769 56,364 >$50B 607,176 34,709 5,590,593 21,655 0 Cullen/Frost Bkr TX330.0670.2381,411,367 11,708 $10B-$50B 146,892 5,664 1,264,475 6,044 . First Horizon Nat Corp. TN340.0520.2131,315,603 27,253 $10B-$50B 193,649 21,766 1,121,954 5,487 0.01 Commerce BancsharesMO340.0510.2681,058,791 25,561 $10B-$50B 141,422 21,129 917,369 4,432 . Suntrust BkGA360.0360.1426,179,640 57,543 >$50B 1,211,554 38,709 4,968,086 18,834 0 Susquehanna BancsharesPA 370.0680.2221,221,505 10,307 $10B-$50B 107,814 5,054 1,113,691 5,253 . Associated Banc Corp. WI 380.0590.1911,279,224 28,926 $10B-$50B 114,220 16,185 1,165,004 12,741 0 Fifth Third BancorpOH390.0350.1144,051,406 71,778 >$50B 529,222 56,554 3,522,184 15,224 0.02 KeycorpOH400.0380.1393,186,664 58,231 >$50B 618,444 46,548 2,568,220 11,683 0 Prosperity BancsharesTX400.0650.405699,037 4,936 $10B-$50B 65,093 2,370 633,944 2,566 . Firstmerit Corp. OH420.0780.2181,138,055 6,599 $10B-$50B 72,983 2,505 1,065,072 4,094 . Valley Nat BancorpNJ 430.0740.2081,180,078 5,034 $10B-$50B 46,789 1,523 1,133,289 3,511 . Webster Financial Corp. CT440.0570.2221,111,695 13,799 $10B-$50B 195,179 8,562 916,516 5,237 0 Peoples United Bk CT450.0660.1571,856,969 12,948 >$10B 158,228 6,439 1,698,741 6,509 0 RBS Citizens NARI 460.0230.1083,241,138 62,262 >$50B 749,241 51,728 2,491,897 10,534 0.01 Sovereign Bk NADE470.0320.1262,796,643 34,502 >$50B 607,928 20,916 2,188,715 13,586 0 Discover Financial ServicesIL480.0031.000206,777 112,259 >$50B 206,777 112,259 - - . East W BancorpCA490.0650.1601,350,924 5,039 $10B-$50B 20,523 919 1,330,401 4,120 0 ComericaTX500.0460.0892,839,695 16,366 >$50B 182,858 6,635 2,656,837 9,731 0 Ally Financial MI 510.0220.0661,964,564 68,244 >$50B 1,741,122 67,679 223,442 565 . Iberiabank Corp. LA520.0630.183758,549 5,125 $10B-$50B 50,189 2,317 708,360 2,808 . Firstbank Holding CompanyCO530.0360.308434,896 7,076 $10B-$50B 33,664 5,740 401,232 1,336 . Barclays Bk DEDE540.0070.972114,360 26,447 $10B-$50B 112,694 26,443 1,666 4 . Rabobank NACA550.0510.172599,000 9,943 $10B-$50B 77,000 7,870 522,000 2,073 . UMB Financial CorpMO560.0510.188684,053 4,552 $10B-$50B 56,126 2,222 627,927 2,330 . Cathay Gen. BancorpCA570.0680.144707,069 3,134 $10B-$50B 40,574 1,147 666,495 1,987 0 GE Capital Bk UT580.0540.069735,067 17,830 >$10B 293,449 15,274 441,618 2,556 . International Bshrs Corp. TX590.0420.212478,638 4,230 $10B-$50B 63,952 2,522 414,686 1,708 . Signature Bk NY600.0410.170658,569 3,136 >$10B 48,718 1,392 609,851 1,744 . BOK Financial CorpOK610.0380.129959,892 4,390 $10B-$50B 76,018 2,165 883,874 2,225 0
All Small Business Lending (less than $1 million)Micro Business Lending (less than $100,000)Macro Business Lending ($100,000 -$1million)
TradeUp, January 2014 36
Name of Lending InstitutionHQ StateRankTA Ratio1TBL Ratio1Amount ($1,000)Number Lender Asset Size Amount ($1,000)Number Amount ($1,000)Number
CC Amount/TA1 (1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11) First BancorpPR620.0480.136607,796 2,919 $10B-$50B 42,713 1,298 565,083 1,621 0.03 Union Bk NACA630.0160.0631,372,869 11,632 >$50B 195,528 7,316 1,177,341 4,316 0 BankUnitedFL640.0310.202381,448 3,098 $10B-$50B 63,209 2,090 318,239 1,008 . Bank of HI Corp. HI 650.0190.204256,052 3,820 $10B-$50B 62,413 3,112 193,639 708 0 State Farm Bk FSB IL660.0110.164163,053 18,808 >$10B 98,274 18,615 64,779 193 . HSBC Bk USA NAVA 670.0060.0581,126,858 19,558 >$50B 305,390 16,381 821,468 3,177 0 Washington Fed. WA670.0130.239174,663 984 >$10B 12,258 439 162,405 545 . Scottrade Bk MO690.0040.52764,835 121 >$10B 144 2 64,691 119 . Astoria FS & LA NY700.0100.256169,440 710 >$10B 5,764 292 163,676 418 . Hudson City Svg Bk FSB NJ710.0011.00042,358 86 >$10B 221 13 42,137 73 . Svb Financial Grp. CA720.0190.079390,367 5,182 $10B-$50B 29,565 3,458 360,802 1,724 0 UBS Bk USAUT730.0140.139588,440 1,765 $10B-$50B 19,037 417 569,403 1,348 . City Nat Corp. CA740.0210.068514,444 3,595 $10B-$50B 46,777 1,505 467,667 2,090 0 PrivatebancorpIL750.0350.058446,034 2,086 $10B-$50B 17,537 722 428,497 1,364 . Northern Trust Corp. IL760.0090.085636,415 2,773 >$50B 23,984 680 612,431 2,093 0 USAA FSB TX770.0001.000436 2 >$10B 436 2 - - . Investors Bancorp MHCNJ 780.0160.111180,865 717 $10B-$50B 6,028 208 174,837 509 . New York Cmnty BCNY790.0110.064495,681 1,410 $10B-$50B 6,227 171 489,454 1,239 . First Republic Bk CA800.0100.078317,825 1,239 >$10B 14,440 344 303,385 895 . Everbank FL810.0110.104159,411 652 >$10B 3,994 148 155,417 504 . New York Private B&TR Corp. NY820.0120.088141,181 486 $10B-$50B 1,632 20 139,549 466 . Morgan Stanley Bk NAUT830.0030.041261,157 834 >$50B 10,000 203 251,157 631 . Flagstar Bk FSB MI840.0070.06994,100 405 >$10B 2,385 123 91,715 282 . Onewest Bk FSB CA850.0040.050107,724 406 >$10B 356 22 107,368 384 . Bank of NY Mellon Corp. NY860.0000.04855,544 351 >$50B 4,995 188 50,549 163 0 Goldman Sachs Group TheNY870.0000.0014,000 6 >$50B - - 4,000 6 0 Deutsche Bk Tc AmericasNY880.0000.0002,000 4 $10B-$50B - 1 2,000 3 0 USAA Svg. Bank NVNR0.000-- 1 >$10B - 1 - - . State Street Corp. MANR---->$50B - - - - 0 E Trade Bk VANR---->$10B - - - - . Charles Schwab Bk NVNR---->$10B - - - - . Third FS&LA OHNR---->$10B - - - - . *The bank was formerly known as GE Money Bank, and was renamed in October 2012. 1 TA = total domestic assets held by the lender; TBL = total business loans held by the lender; and CC=credit card loans held by the lender. Source: U.S. Small Business Administration, Office of Advocacy, from Call Report data.
All Small Business Lending (less than $1 million)Micro Business Lending (less than $100,000)Macro Business Lending ($100,000-$1million)
TradeUp, January 2014 37 References
1 Ayyagari, Meghana, Aslı Demirgüç-Kunt and Vojislav Maksimovic, 2006. “How Important Are Financing Constraints? The Role of Finance in the Business Environment.” World Bank Policy Research Working Paper 3820.
See also, Zia, Bilal. 2007. “Export Incentives, Financial Constraints, and the (Mis)allocation of Credit: Micro-level Evidence from Subsidized Export Loans.” Journal of Financial Economics, forthcoming; and Banerjee, Abhijit V.
and Esther Duflo. 2004. “Do Firms Want to Borrow More? Testing Credit Constraints Using a Directed Lending Program.” CEPR Discussion Paper 4681.
2 Joe Peek, “The Impact of Credit Availability on Small Business Exporters” (Washington: Small Business Administration Office of Advocacy, 2013).
3 Beck, Thorsten, Aslı Demirgüç-Kunt, Luc Laeven and Vojislav Maksimovic. 2006. “The Determinants of Financing Obstacles.” Journal of International Money and Finance, 25, 932-52.
4 Beck, Thorsten, Aslı Demirgüç-Kunt, Luc Laeven and Vojislav Maksimovic. 2006. “The Determinants of Financing Obstacles,” Journal of International Money and Finance, 25, 932-52.
5 World Bank Group, Enterprise Surveys Database, 2010.; http://www.enterprisesurveys.org; “World Business Environment Survey” (WBES) of more than 10,000 firms in 80 countries.
6 Manova, Kalina. 2013. “Credit Constraints, Heterogeneous Firms, and International Trade.” The Review of Economic Studies 80: 711-744.
7 See, for example, Bellone, Flora, Patrick Mussoy, Lionel Nestaz, and Stefano Schiavox. 2010. “Financial
Constraints and Firm Export Behaviour,” The World Economy 33, 3: 347-373; and Wagner, Joachim, 2012. “Credit constraints and exports: Evidence for German manufacturing enterprises.” Working Paper Series in Economics and Institutions of Innovation 286, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
8 Molina, Danielken and Monica Roa. 2013. “Export Margins and External Financing: Evidence from Colombia.”
Mimeo (October).
9 Campa J.M., Shaver J.M. 2002. “Exporting and capital investment: on the strategic behavior of exporters,”
Discussion Paper No. 469, IESE Business School, University of Navarra.
10 U.S. International Trade Commission. 2010. “Small and Medium-Sized Enterprises: Characteristics and Performance.” Investigation No. 332-510. Publication 4189 (November)
<http://www.usitc.gov/publications/332/pub4189.pdf>. These findings are echoed by the 2012 GE Capital and Ohio State University survey of SMEs with $10million to $1 billion in revenue. Although this survey did not specifically ask firms about financing for cross-border trade, it did find that 55 percent of SMEs reported a lack of adequate access to capital. See Fisher College of Business, Ohio State University, and GE Capital. 2011. “The Market That Moves America: Insights, Perspectives, and Opportunities from Middle Market Companies”
<http://www.middlemarketcenter.org/wp-content/uploads/2012/01/The_Market_that_Moves_America4.pdf>.
11 U.S. International Trade Commission. 2010. “Small and Medium-Sized Enterprises: Characteristics and Performance.” Investigation No. 332-510. Publication 4189 (November)
<http://www.usitc.gov/publications/332/pub4189.pdf>.
12 OECD. 2008. Removing Barriers to SME Access to International Markets. Paris: OECD.
13 Ann Marie Wiersch and Scott Shane, “Why Small Business Lending Isn’t What It Used to Be,” Economic Commentary /Cleveland Federal Reserve, 14 August 2013
http://www.clevelandfed.org/research/commentary/2013/2013-10.cfm.
TradeUp, January 2014 38
14 Bassett, William F. Seung Jung Lee, and Thomas W. Spiller. 2012. “Estimating Changes in Supervisory
Standards and Their Economic Effects,” Federal Reserve Board, Divisions of Research and Statistics and Monetary Affairs, Finance and Economics Discussion Series, no. 2012-55.
15 Ann Marie Wiersch and Scott Shane, “Why Small Business Lending Isn’t What It Used to Be,” Economic Commentary /Cleveland Federal Reserve, 14 August 2013
http://www.clevelandfed.org/research/commentary/2013/2013-10.cfm.
16 See “SBA Lending Activity in FY 2013 Shows SBA Continuing to Help Small Businesses Grow and Create Jobs,” SBA, 29 October 2013 <http://www.sba.gov/content/sba-lending-activity-fy-2013-shows-sba-continuing-help-small-businesses-grow-and-create-jobs>
17 Federal Reserve Board of Governors. 2012. “Senior Loan Officer Opinion Survey on Bank Lending Practices at Selected Branches and Agencies of Foreign Banks in the United States“ (July) <
http://www.federalreserve.gov/boarddocs/snloansurvey/201208/table2.htm>.
18 National Small Business Association and Small Business Exporters Association, “2013 Small Business Exporting Survey,” <www.nsba.biz/wp-content/uploads/2013/06/Exporting-Survey-2013.pdf> (October 16, 2013).
19 “Ex-Im Bank announces $740 million supply-chain program with The Boeing Company,” Export-Import Bank of the United States Press Release, 17 February 2012.
20 MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters.
21 “Investor Confidence in U.S. Grows as Sentiment Declines in Emerging Markets,” Press Release on the 2013 Global Venture Capital Survey, Deloitte and National Venture Capital Association, 14 August 2013.