In fact, business loans surged in September and October primarily at large banks and banks affiliated with securities firms, institutions that, due to financial market conditions, likely had to retain on their books larger-than-expected portions of syndicated loan deals. Fortunately, the vast majority of U.S. banks are well capitalized and thus should be able to maintain their lending capacity.
In addition, lender constraints on small business loans may be mitigated somewhat by loan guarantees provided by the SBA. In the past, following declines in bank capital, the volume of loans associated with SBA guarantee programs contracted considerably less than the volume of other loans. However, as our report points out, SBA guaranteed loans are only a small portion of total small business loans.