Market Overview

Today's Trend: Today Healthy Small Banks take the Small-Business Opportunity


In what appears to be an increasing trend, the healthiest small banks are taking an important share of the small-business market away both from their larger competitors and from their weaker peers. Sunovis Financial helps small banks with complete SBA services in order to thrive and compete amid today's difficulties.

San Francisco, California (PRWEB) October 24, 2012

According to a report by the Federal Reserve Bank of San Francisco released recently, "strong" small bank loans (secured by real property) under $1 million actually grew in 2011. Meanwhile, loans to small business from "weak" small banks and larger banks declined, says Elizabeth Laderman, an economic analyst at the Federal Reserve Bank of San Francisco.

These moves affect small businesses and the recovery of the U.S. economy. Sunovis Financial has witnessed this in action. Small banks that are weak and do not have sufficient reserves are unable to make new loans or grow. However, one solution for small banks to stabilize is by offering SBA (Small Business Administration) loans, which are guaranteed by the government and help small businesses create jobs and grow the local economy.

What's a strong versus a weak small bank? “Supervisors judge bank financial health by taking into account capital adequacy, asset quality, management quality, earnings, liquidity, and sensitivity to market risk,” says the Fed. The percentage of small banks that faltered, based on these qualities, grew to 31% at the end of 2010, the Fed tells us.

Demand for commercial and industrial (C&I) loans under $1 million may be picking up. The growth of these loans at strong banks in the most recent study period marks a change from the period between the second quarter of 2009 and the second quarter of 2010. In this earlier period, even strong banks contributed to an overall decline in C&I loans under $1 million, the report says.

Ironically, with a segment of small banks making credit available to small business, there is less demand from that sector for loans. Fewer healthy small businesses want to borrow – surveys by small business associations suggest that this is because sales are "weak" or there is uncertainty.

"You have many parts of the country that went very deep into recession and still have never recovered,” says Paul Merski in Bloomberg Businessweek August 28, 2012. Merski is chief economist at the Independent Community Bankers of America, which represents community banks. He stated that banks in such areas as California, Nevada, Arizona, and Florida may not have the opportunity to make good loans.

The psychological obstacle is also one to consider in the small business world – in a recent poll by the New York Federal Reserve, a quarter of the small businesses surveyed in the New York Metropolitan Area didn't apply for loans that they wanted because they believed they would be turned down! Banks need help to be able to offer loans, and small businesses need help obtaining those loans. This is the goal of Sunovis Financial - to assist both small banks and small businesses.

Clearly the current economic climate is hurting banks and small businesses alike. For small banks seeking to increase their share of small business loans, the Small Business Administration (SBA) offers favorable conditions and government-backed guarantees.

About Sunovis Financial
The mission at Sunovis Financial is to help small banks and businesses become stronger through SBA financing.

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