Bank of America Lags in Small Business Lending

You may have heard claims by Bank of America’s about its stature in small business lending:

“With our scale and depth of resources, Bank of America offers small business owners unparalleled access to solutions to help run their businesses smoother, more profitably and with greater access to a wider business network.” — Mark Hogan, BAC Small Business Banking

True enough, BAC is the largest Small Business Administration Lender, measured by aggregate statistics for the entire country.  In fiscal year 2007, Bank of America made more than 10,000 SBA (7) a loans for a sum of more than $300 million.

Yet another look reveals that this position is really a product of the size of their business.  This is an mile-wide, inch-deep kind of commitment.

Take a look at the area where, of any in the country, Bank of America’s “leadership” in small business banking should translate into market dominance:  Charlotte, North Carolina.  This is BAC’s headquarters.  Charlotte is home to some other large banks, of course, but none that claim to be the leader in small business banking.

That’s too bad, because many of them outpace Bank of America.  Let’s look at the list of leading small business lenders in the area, in terms of loans by loan amounts.  We get data from the Federal Financial Institutions Examination Council (FFIEC), the leading publicly available provider of data on small business loans.  The FFIEC cuts has several ways of defining small business lending – this one applies to firms with less than $1 million in annual revenue.

1. Wachovia (now part of Wells Fargo), $120,000 million
2. BB & T, $89.9 million
3. First Citizen’s Bank & Trust, $56.1 million
4. First Charter (now part of Fifth Third), $38.2 million
5. FIA Card Services, $38 million
6. Suntrust, $30.2 million
7. Citizen’s South, $25.8 million
8. RBC Centura, $22.8 million
9. Bank of America, $19.1 million

So, in Charlotte, Bank of America actually lags 8 institutions.  Some significantly smaller institutions, most glaringly Citizen’s South, provide more funding to the region’s small businesses.

Now, it is possible that some could claim that $1 million is the wrong place to draw a line in the sand.  Sure, that’s reasonable.  Then again, its as reasonable as most other demarcations.  It means that businesses up to the size of a small deli or a local pest service are counted, but perhaps a local franchise is excluded.  The former are likely to have a particularly hard time getting loans.  They are also likely to be job generators, as they include many nascent firms with the potential to expand quickly.

Still, this is getting ahead of things.  What about in terms of loan volume?  Well, here, the list ahead of Bank of America is probably too long to write in a blog.  Suffice to say that Bank of America comes in 17th in Charlotte.

There is a caveat, applying to both lists.  FIA Card Services, which ranks fifth by amount and second by volume in Charlotte, is the former MBNA brand acquired in 2006 by Bank of America.  Taken together, BAC’s sums would increase a few places in each category.

Nonetheless, the impression remains off the mark.  If the pr surrounding BAC’s small business lending indicated that it mostly consisted of credit card loans (presumably with high interest rates, terms subject to constant revision, and few consumer protections) wouldn’t that seem different?

In fact, to make it more transparent – here is one disclosure statement of standard terms for a B of A card through FIA:  variable interest rates range from 12 percent to as high as 19.99 percent. Cash advances are almost 25 percent.  A default APR of 27.24 percent! Hardly the kind of lender that a small business would want to work with while it finds its way.  More like a lender of last resort.

Ouch!  Doesn’t sound like higher standards.