small businessDuring the Great Recession and recovery period, stories from bankers and business owners suggested that the flow of small business credit was dramatically shaped by changes in demand and tightening lending standards. A closer look at data gathered under the Community Reinvestment Act (CRA) of 1977 shows that, in terms of the number and dollar amount of small business and small farm loans originated by CRA reporting institutions, there were somewhat similar trends and patterns for the entire United States and the six states (Alabama, Florida, Georgia, and parts of Louisiana, Mississippi, and Tennessee) that make up the Federal Reserve Sixth District.

First, there was a steady increase in the number and the dollar amount of loans originated from 2000 to 2007, followed by a sharp decrease during the Great Recession and recovery period. The decline during the recession and recovery period as a percent of 2007 numbers was sharper for the district than the country for both the number and the amount of loans. As for the distribution of the funds among various types of loan categories, similar trends were shown for the United States and the district for all three types of small business loans—under $100,000, $100,000 to $250,000, and over $250,000—with the hardest-hit category during the recession and recovery period being loans under $100,000. The other categories remained somewhat stable.

The trends in loan amounts per capita in counties did not differ much between the country and the district and followed a similar trend over the time period considered; the United States slightly lagged behind the district through 2007. The urban and rural comparisons showed that per capita dollar amounts of small business loans for rural counties are much lower compared to urban counties for both the United States and the district. Analysis also showed that only a tiny fraction of total small business loans, whether measured in number of loans or in dollar amount, originated in low- and moderate-income (LMI) counties. While a more accurate analysis of the distribution of loans will require small business information in LMI counties, the present analysis hints at the possibility that, despite the CRA, availability of and access to small business credit in LMI communities is still a policy issue. In contrast, the share of the number and amount of small farm loans originated in LMI counties ranged from 25 percent to 35 percent for both the country and the district, probably because LMI counties are disproportionately rural.

Read the full report for more details about CRA loans.