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Report: PPP Loans Fuel Surge in Small Business Lending in 2020

  • Data released under the Community Reinvestment Act shows major boost in loans for small businesses and community development in 2020
  • Paycheck Protection Program credited for increasing the number of loans as well as loan amounts
  • Small farm loans decrease in 2020, though their dollar amount increases

Summary by Dirk Langeveld

The Paycheck Protection Program helped fuel a surge in small business lending in 2020, according to data released under the Community Reinvestment Act.

A total of 687 banks reported their small business, small farm, and community development loans under the legislation. The CRA requires that banks with more than $1.305 billion in assets must report this data, although some lenders that fell below this level voluntarily shared data as well.

These banks originated or purchased 8.4 million small business loans totaling $461.8 billion. The total number of loans marked a 9.7 percent increase from 2019, while their dollar amount was up by 78.7 percent.

Small farm loans were down 1.7 percent from 2019, although their dollar amount was up by 7.9 percent. A total of 621 banks reported community development lending activity totaling nearly $169 billion, a year-over-year increase of 52 percent. This was also attributed largely to PPP lending, since many of the loans that didn’t meet the CRA’s qualifications for small business loan reporting qualified for community development reporting instead.

According to the U.S. Small Business Administration, approximately 5.2 million PPP loans totaling about $525 billion were approved in 2020. The program was later extended with a third round of funding in 2021, which approved an additional 6.7 million transactions totaling $277.7 billion in both first draw and second draw loans.

Most of the small business loan originations reported under the CRA were for amounts under $100,000. These loans accounted for 87.5 percent of small business loan originations and 78.1 percent of small farm loan originations, but only 32.1 percent of total small business loan dollars and 28 percent of total small farm loan dollars.

About 40.7 percent of small business loan originations were made to entities with revenues of $1 million or less, accounting for 25.5 percent when measured by dollar amount. About 56.3 percent of small farm loan originations were extended to farms with revenues of $1 million or less, accounting for 66.3 percent when measured by dollar amount.

The CRA data is collected by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency. The Federal Financial Institutions Examination Council, which published the findings, noted that this data only covers a portion of credit extended to small businesses and small farms, since certain banks and savings associations as well as nonbank institutions like commercial finance companies are not covered by the CRA.

However, the data also shows that lenders reporting data under the CRA account for about three-quarters of outstanding small business loans (by dollars) at bank and thrift institutions. They also account for about 32 percent of the dollar amount of outstanding small farm loans at bank and thrift institutions.

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