The news on big banks and small business loans hasn’t been especially positive this past year.
Word on the street — Main Street, that is — is that credit remains tight since the financial meltdown of 2008. But on Thursday, Citi released some good news: It had met and surpassed its $7 billion lending goal to U.S. small business in 2011 by $900 million.
That $7.9 billion was 30 percent higher than the $6 billion lent in 2010. So, it seems credit for small businesses is loosening. Or, is it just that business owners are doing a better job of managing their companies?
“It’s a little bit of both, really,” Raj Seshardri, Citi’s head of U.S. Small Business told CNBC.com.
“We do a quarterly survey of small businesses, and what we’re seeing is that businesses are healthier,” she said. “They’ve streamlined, they’ve renegotiated contracts.”
Citi's small business lending group — part of Citigroup — services businesses with annual revenues of $20 million or less. The past few years have been tough on those small business owners. There has been a winnowing out of companies that, for many reasons, weren’t strong enough to survive. And those that are still around, said Raj, are cautious. “They’re not jumping in with both feet. They’re reading and watching and waiting to see the economy grow.”
Successful applicants, she said, come in all shapes and sizes. There is no one industry that comes up a clear winner in the loan approval game. But those that are successful, said Raj, are those who can show robust cash flow and concrete plans for future growth.
How about for those whose balance sheet is less than robust? “We’re reaching out, finding out how we can be a partner for them,” she said, stating that Citi “wants to help them solve whatever issue they are dealing with.”
Still, there are never guarantees. But if there’s one thing to take away from this news, it's that money is available. Get your ducks in a row, and you have a better chance of buying new equipment this year.
Seshardri could not say how much Citi lent in 2007, the year before market conditions put the brakes on so much lending, so it's hard to say whether 2011's $7.9 billion is a great improvement or just an incremental increase. (“We didn’t track loans with the same definition we do now,” she explained, when asked to provide a number.) But the plan is for Citi to increase its commitment to small business lending over the next few years: $8 billion this year and $9 billion in 2013. “I’d love the news to be the same, next year, that we’ve exceeded the commitment,” she said.
Whether that happens depends, of course, on market conditions. “In 2011, there was a stall in August, but it picked up momentum at the end of the year, and we see that continuing into the first quarter of this year. But there are a lot of unknowns, and we’re still somewhat on shaky ground. I hope we don’t have a summer like last summer.”