business of micro-lending, The

Northwestern Financial Review, Sep 1-Sep 14, 2002 by Bengtson, Tom

Small banks play a critical role in the American economy, providing much of the credit to small and medium-size businesses, which provide most of the jobs in this country. Although every lender wants the "big" deals, there are a lot of businesses out there that depend on modest extensions of credit. Fortunately, there are plenty of banks willing to sit down and work with a business owner to arrange a five-figure loan.

The Small Business Administration's Office of Advocacy just published its 2001 edition of Micro-Business-Friendly Banks in the United States. Culling information from call reports and Community Reinvestment Act filings, the SBA pulled together a list of banks that have an outstanding record of making business loans of less than $100,000. Many of the top socalled "micro-lenders," it turns out, are banks with less than $100 million in assets.

The SBA reports micro-business loans outstanding totaled $126.8 billion in June 2001, an increase of $5.4 billion or 4.4 percent over 2000. The number of micro-business loans continued to increase at a rapid rate - by 10.1 percent over the previous year.

Much of the micro-loan business, however, is related to credit cards designed for the small business market. This credit generally comes from the nation's largest banks and finance companies. The business credit card is a valuable product but it's not the same as a small business loan - one where the borrower knows a loan officer at the bank who's willing to take a look at the borrower's financials every now and then. Loans of less than $100,000 unrelated to credit cards increased by 2.3 percent in amount and less than 1 percent in number during 2001, the SBA reports.

According to the SBA, here are the top small bank micro-lenders for the states in this magazine's coverage area: Farmers State Bank of Calhan, Colo.; Decorate Bank & Trust Company and Freedom Security Bank, Coralville, Iowa; Peoples National Bank of Kewanee and The American National Bank of De Kalb County in Sycamore, Ill; Hometown National Bank in New Albany, Ind.; Community National Bank in Chanute, Kan.; Michigan Heritage Bank in Farmington Hills, Mich.; United Community Bank in Perham and Heritage Bank, N.A., Willmar, Minn.; Peoples Bank, Cuba, Mo.; First Citizens Bank of Butte, Mont.; Dacotah Bank - Bank Valley City, N.D.; Platte Valley National Bank, Scottsbluff, Neb.; Peoples State Bank, De Smet, S.D.; Community Bank, Superior and Chippewa Valley Bank, Winter, Wis.; and First National Bank of Buffalo, Wyo.

Congratulations to all the banks that are keeping the small business sector of our economy humming.

By Tom Bengtson, Publisher