FDIC Chairman remarks on 2024 Small Business Lending Survey

Bank Regulatory FDIC Survey Community Banks Small Business Small Business Lending

Recently, FDIC Chairman Martin Gruenberg remarked on the 2024 Small Business Lending Survey (SBLS) report at a community banking conference. He highlighted that technological advancements have not altered the relationship-oriented nature of small business lending in a fundamental way. The SBLS report, which, as previously covered by InfoBytes, provided insights into small business lending practices based on data collected in 2022, including loan approval processes, geographic markets, competition, use of financial technology, and lending to start-ups. Gruenberg explained that the report revealed that while banks adopt more financial technologies, the underwriting and approval processes for small business loans remain staff-intensive. Only 3 percent of banks fully automate the underwriting of some loans, and only 5 percent allow borrowers to complete the loan process entirely online.

As Gruenberg explained, the SBLS report also underscored the critical role of branches and staff in maintaining relationships with small business customers. About 80 percent of banks defined their small business lending market based on branch locations, with borrowers typically found within 40 miles of these branches. Community banks leverage “soft” information, such as a loan officer’s assessment, to make credit decisions, setting them apart from larger banks. This approach enables community banks to serve a broader range of small business borrowers, including startups, without relying heavily on government-guaranteed lending programs.