White Paper
2014 Summary – State of SME Finance in the
United States
Aseem Grover and Kati Suominen*
January 2014
___________
* Aseem Grover is MBA Candidate at the UCLA Anderson School of Management; Kati Suominen is
Founder and CEO of TradeUp Capital Fund.
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Executive Summary
Small and medium-sized enterprises (SMEs), firms with fewer than 500 employees, are the
backbone of U.S. economy. They make up 99 percent of all firms, employ over 50 percent of
private sector employees, and generate 65 percent of net new private sector jobs. SMEs account
for over half of U.S. non-farm GDP, and represent 98 percent of all U.S. exporters and 34
percent of U.S. export revenue.
To thrive, SMEs need access to credit and cash flow. Credit conditions for U.S. SMEs
deteriorated in the wake of the financial crisis, and are expected to continue depressed as Basel
III capital adequacy requirements come into effect in 2015. Early-stage companies seeking
equity finance have also faced challenges, as venture capital is increasingly focused on laterstage companies and available only to a handful of firms.
What is the state of SME finance in the United States today, five years after the financial crisis?
This TradeUp white paper provides answers. We review trends in lending and equity financing
to SMEs, discuss emerging financing sources for SMEs, and assess the future of SME finance in
light of the rise of alternative, online lenders and crowdfunding. We will also analyze the
specific financing issues faced by SMEs that seek growth through exports.
The summary highlights of this report are as follows:

Overall, financing for SMEs appears to be recovering from the immediate post-recession
years. However, the more traditional sources of SME capital – banks for loans and VCs
for early-stage funding – are focusing on larger and less nascent companies. A number of
instances and new delivery methods are taking their place, from online micro- and small
business lenders to supply chains finance programs, angel investors, and crowdfunding
platforms.

Bank lending to SMEs has improved, but has yet to return to pre-crisis levels. In June
2013, the loan balances for commercial and industrial (C&I) loans of $1 million or less
stood at $288.7 billion, $47 billion below June 2008.

Federal government sources have played a complementary and to an extent
countercyclical role during the past few years in SME lending. In FY 2013, SBA
supported $29.6 billion in lending to small businesses, about the levels of the prior two
years. The Export-Import Bank supported export credit insurances and export working
capital for SMEs at $5.2 billion in 2013, somewhat below 2011-12 authorizations.

The burgeoning market of online lenders has yet to be analyzed fully, but the success of
several platforms indicates a new, strong, and relatively affordable source for financing
particularly for small firms that lack access to sufficient bank credit.

Expansion-sand Late-stage investments together accounted for $13.4 billion of VC
investments through Q1-Q3 of 2013. Seed- and Early-Stage investments attracted 46
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percent less investments during the same time period amounting to a total of $7.2 billion.
The Software industry continues to garner the most VC dollars in the United States, while
Silicon Valley continues to dominate the US VC investments by geography, leading the
pack with 42 percent investments in 2013. Internationally, Israel and United States
remain the hotbeds of innovation with the highest VC spending as a percent of GDP
among the OECD countries in 2012.

Angel investment is recovering and has become a strong complement to VC financing. In
the first two quarters of 2013, angels invested a total of $9.7 billion, an increase of 5.2
percent over the first half of 2012 and 5 percent increase form 2007.

Global crowdfunding volume nearly doubled in 2012 to $2.7 billion, of which over onehalf, or $1.6 billion, was in North America. Crowdfunding is expected to exceed $5
billion in 2013.
As the U.S. economy recovers, 2014 appears to become a big year for alternative lenders and
investors on the online and crowdfunding spaces, and see their expansion also to mobile
platforms. However, bank financing to SMEs is expected to continue subdued as Basel III capital
adequacy requirements come into effect in 2015. Because banks will have to hold additional cash
in reserve to meet the terms of Basel III, they will have less money to lend compared to pre-crisis
levels, which is expected to have a disproportionately negative effect on SME financing
opportunities. This however will open up opportunities for new business models to accommodate
the recovering financing demands by American SMEs.
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2014 Summary – State of SME Finance in the United States
Introduction
Small and medium-sized enterprises (SMEs), firms with fewer than 500 employees, are the
backbone of U.S. economy and employment. They make up 99 percent of all firms, employ over
50 percent of private sector employees, and generate 65 percent of net new private sector jobs.
America’s 28 million SMEs account for over half of U.S. non-farm GDP. SMEs are also more
inclined to export than are large firms. While U.S. SMEs’ export participation is quite limited
compared to other advanced nations, with 5 percent of all SMEs engaging in exports, SME
exporters represent 98 percent of all U.S. exporters and 34 percent of U.S. export revenue.
To grow and contribute to the U.S. economy and exports, SMEs need access to free cash flow
and credit. Indeed, financing is widely found to be the single most robust determinant of firm
growth.1 However, small firms consistently report higher financing hurdles than large enterprises
given their small size, limited assets, and general inability to raise funds through credit markets
or publicly traded equity.2 Given that SMEs tend to have greater volatility in earnings and
growth than do larger companies, they are seen as riskier investments, and thus subject to higher
cost of capital.3 In addition, with limited staff and time, SMEs have high opportunity costs to
cultivate relationships with lenders, or to diversify these relationships so as to shop around for
the best deal.
Credit conditions for U.S. SMEs deteriorated in the wake of the financial crisis, and are expected
to continue depressed as regulatory environment tightens and as Basel III capital adequacy
requirements enter into effect in 2015. Because banks will have to hold additional cash in reserve
to meet the terms of Basel III, they will have less money to lend compared to pre-crisis levels.
These new standards are expected to have a disproportionately negative effect on SME financing
opportunities.
Early-stage companies seeking equity finance have also faced challenges. Venture capital is
increasingly focused on later-stage companies and available only to a handful of firms. Yet at the
same time, angel investors have assumed a greater role in start-up capital, and crowdfunding is
poised to add significantly to, if not transform, start-up finance.
The purpose of this annual update is to take stock of SME finance in the United States by reviewing
trends in lending and equity financing to SMEs in 2000-2013, discuss emerging financing sources
for SMEs, and assess the future of SME finance in light of Basel III and other regulatory changes.
We will also analyze the specific financing issues faced by SMEs that seek growth through exports.
The first section reviews of importance of capital for SMEs and for SME exporters. Section two
assesses lending to SMEs in the past several years, highlighting two newer trends, the rise of online
lending platforms and supply chains finance. Section three focuses on venture capital transactions.
Section four turns to angel investment, and section five discusses the rise of crowdfunding. Section
six concludes.
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1. Importance of Capital to SMEs’ Growth and Trade
Financing is widely seen as the key driver of SMEs’ growth and exports alike. Capital is the oxygen
that enables the firm to market their goods and services, expand production capacity, and sustain
cash flow. At the same time, SMEs are widely viewed as having more limited access to capital
than large companies. Given their typically higher volatility and less extensive financial track
record, SMEs are generally more credit-constrained than are large firms. SMEs tend to have fewer
external financing sources available to them and are typically much more dependent on banks than
are larger firms, which can raise capital through such measures as issuance of bonds, commercial
paper, or publicly traded equity.
Further, it takes typically as much work, if not more, for lenders to assess the creditworthiness of
a small borrower as a large one, particularly as smaller firms tend to have less financial history
and fewer formal financial tracking processes. These relatively high processing costs are reflected
in the financing costs on SMEs. In addition, with limited staff and time, SMEs have high
opportunity costs to cultivate relationships with lenders, or to diversify these relationships so as to
shop around for the best deal. In a rigorous global study on access to capital that covers 10,000
firms from 80 countries, including the United States, the probability that a small firm lists financing
as a major obstacle is 39 percent compared with 36 percent for medium-size firms and 32 percent
for large firms.4
Recent surveys reflect the central place of capital for SMEs’ work and the challenges in accessing
financing. When asked to name the most severe obstacles to growth in a recent survey by Federal
Reserve Board of New York, 49 percent of 670 surveyed SMEs (of up to 499 employees) listed
access to capital as the leading challenge (figure 1). No other challenge such as taxes, finding
employees, or regulations, was as widely cited. Unsurprisingly, access to capital varies with the
firm’s performance: 66 percent of SMEs operating at a loss listed access to capital as a growth
challenge, whereas only 36 percent of profitable SMEs cited access to capital as a challenge to
future growth.
The external funding obstacles reflected in the main sources of financing for SMEs are not bank
loans or external funding, but business earnings, personal savings, and credit cards (figure 2). The
most typical need is to secure cash flow and fund day-to-day operations (cited as the reason for
seeking financing among 40 percent of respondents, followed by inventory (12 percent) and plan,
equipment, and vehicle investment (10 percent).
These results are echoed in the online lender OnDeck’s October 2013 survey, where access to
credit was cited as the top concern among small businesses, ahead of such challenges as growing
sales and taxes. They are also similar to international survey results: in a World Bank survey,
SMEs across emerging markets and developing countries listed lack of financing as the second
most severe obstacle (after corruption), while large firms placed it fourth.5
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Figure 1 – Growth Challenges among U.S. SMEs, 2013
Source: FRBNY Small Business Credit Survey, May 2013 (N=670)
Figure 2 – Primary Funding Sources for U.S. SMEs, 2013
Source: FRBNY Small Business Credit Survey, May 2013 (N=650)
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1.1
Capital is Critical also for SME Exporters
U.S. SMEs are seeking growth through exports in record numbers. There is enormous latent
capacity just in the United States: only 300,000 of U.S. SMEs export. Recent surveys indicate that
three-quarters of current SME exporters and a near-quarter of non-exporters look to expand their
exports. For these SMEs, access to capital is key for setting up and expanding export-related
operations, offering competitive payment terms to foreign customers, developing new export
products and markets, and investing in production facilities, new capabilities and staff required for
exporting. Indeed, export activities generate additional financial needs for which exporting SMEs
need to identify and source capital:

Export entry involves high upfront sunk costs stemming from such activities as identifying
foreign customers and new export markets, creating distributor networks, and meeting
foreign product standards. These costs are proportionally much greater for SMEs than they
are for large firms. Prospective “born global” companies are particularly disadvantaged,
despite their exceptional potential for innovation and growth, as they have limited assets
available as collateral, and as equity financing is often available only for a select number
of firms.

Costs of each export transaction can be more onerous than those incurred in the domestic
market, such as higher shipping, logistics, and trade compliance costs. As an example,
cross-border shipping and delivery usually take 30-90 days longer to complete than do
domestic orders, with each day in transit adding to shipping costs.6 In addition, exporters
need sufficient resources to manage risks such as potential customer non-payment,
exchange rate instability, and cash flow problems.

Exporters need sufficient cushion and resources to manage risks such as potential customer
non-payment and exchange rate instability – all the while having to accommodate foreign
buyers, such as large foreign OEMs (original equipment manufacturers) that demand
payment terms that extend beyond the 60- and 90-day norm in the U.S. market.
Recent academic literature finds that firms that are credit constrained are less likely to export.7
Conversely, access to finance enhances firm’s exports and buoys SMEs’ exports in particular.8
In addition, exporting loosens firms’ credit constraint, for example by making companies more
productive and by playing a countercyclical role when domestic markets flail.9
Survey data show that inadequate financing constrains trade especially among SMEs, as they
tend to be more credit-constrained than large companies. In a 2010 U.S. International Trade
Commission survey of 2,349 SMEs and 849 large firms, 32 percent of SMEs in manufacturing
sectors and 46 percent of SMEs in services sectors cited obtaining financing as “burdensome” to
conducting cross-border trade. By contrast, only 10 percent of large manufacturing firms and 17
percent of large services firms shared this view.10 What is more, out of 19 hurdles, SME
manufacturers rated access to financing as the steepest hurdle to trade, while SMEs in service
sectors rated access to capital as the third hurdle to trade (figures 3-4).11
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These data are echoed by surveys in other advanced markets. In a 2008 OECD survey of 230
SMEs, access to working capital was ranked as the greatest hurdle to trade, out of 47 hurdles.12
In a 2010 survey commissioned by the European Commission of nearly 9,500 European SMEs,
54 percent of SMEs viewed lack of capital as an “important barrier” to doing business in the EU
market and 44 percent to doing business in extra-EU markets. No other barrier (paperwork, laws
and regulations, lack of information on overseas markets, etc.) was considered as important.
Figure 3 - U.S. Manufacturing SMEs Cite Obtaining Financing as the Leading Impediment
to Engaging in Global Trade
Source: U.S. International Trade Commission (2010).
Figure 4 - U.S. Services SMEs View Obtaining Financing as the Third Leading Impediment
to Engaging in Global Trade
Source: U.S. International Trade Commission (2010).
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2. Lending to SMEs: Alternative Sources Filling the Gap
The financing challenges faced by SMEs were compounded by the 2008-09 financial crisis,
which severely undermined SMEs’ credit conditions. Bank lending to SMEs has improved, but
has yet to return to pre-crisis levels. In June 2013, the loan balances for commercial and
industrial (C&I) loans of $1 million or less stood at $288.7 billion, $47 billion below June 2008
preceding the Great Recession (figure 5). The annual decline in small-business lending in 20082012 has reversed, yet particularly the smallest of SMEs have trouble securing a loan, and loans
are not as substantive as they used to be. The total number of small business loans has been
increasing from 2009-2011 levels (figure 6), however the average loan size is still below 2010
levels.
Some of the causes behind the lowered lending are bank consolidation, which has reduced the
number of banks focused on the small business segment; and increased regulatory scrutiny that
has caused banks to tighten lending standards and secure more internal approvals, which in turn
has reduced the share of creditworthy borrowers and also increased bank’s fixed costs per loan,
making SME loans less attractive. 13 Recent research on the heightened supervision during and
after the 2008-09 recession finds that increased stringency can have a statistically significant
impact on total loans and loan capacity for some 20 quarters after the onset of the tighter
supervisory standards.14
Granted, banks are not the only bottleneck: small businesses have also been borrowing less in the
past few years’ lackluster economy, as weak earnings and economic uncertainty have translated
into subdued loan demand.15 In addition, collateral values have been low as real estate prices
have declined, curtailing the amount that small business owners can borrow. In a Wells
Fargo/Gallup quarterly survey of 600 small business owners with up to $20 million in annual
sales, the share of percentage of small business owners intending to increase capital investment
over the next 12 months fell between 2007 and 2013, from a high of 33 percent in Q2 of 2007 to
20 percent Q4 2012 and 24 percent in Q4 of 2013. The share of small business members of the
National Federation of Independent Businesses (NFIB) who said they borrowed once in the past
three months fell from 36 percent to 29 percent between January 2008 and June 2012, and was at
steady 30 percent in December 2013.
Frustrated by long processing times at credit unions, small business customers are gradually
going back to bigger national and regional banks for their financing needs. In 2012, the most
prolific U.S. SME lenders include American Express, First Citizen Bancshares and Wintrust
Financial (appendix I). Larger players such as Citizens, TD Bank, Union Bank, and Wells Fargo
are becoming increasingly active in small business lending. Yet approvals are hard to secure, in
part because small business financials have been weak. According to the November 2013
Biz2Credit Small Business Lending Index, the largest banks with over $10 billion in assets
approved only 17.4 percent of loan applications. Smaller, community banks are granting about
half of the loan applications.
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Figure 5 - Loans to Small Businesses by FDIC-Insured Institutions in 2000 – 2013, by Loan
Size
Source: FDIC.
Figure 6 - Loans to Small Businesses by FDIC-Insured Institutions in 2000 – 2013, by
Number of Loans in Loan Size Category
Source: FDIC.
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2.1
Small Business Administration Loans
SBA has played somewhat of a countercyclical role as bank lending to small business has dried
up. In FY 2013, SBA supported $29.6 billion in lending to small businesses, nearly at par with
SBA’s two record years of supporting $30.25 billion in small business loans in FY 2011 and
$30.5 in FY 2012 (figure 7). In total, the SBA supported 54,106 loans in 2013.16 Among others,
this included 7,700 “504” loans (totaling $11.7 billion), which provide small businesses with
long-term, fixed-rate financing to acquire real estate and major fixed assets; 682 CAPlines loans
at $500 million that provide working capital lines of credit to meet small businesses’ short-term
working capital needs; and 4,000 Small Loan Advantage (SLA) loans ($625 million) that are
under $350,000 loans targeting small businesses and entrepreneurs in underserved communities.
Figure 7 – SBA-Supported Loans to Small Businesses in 2010-2013 (7(a) and 504 loans in
millions of $, microloans in actual number)
Source: SBA Annual Report for FY 2013.
2.2
Export-Import Bank Guarantees and Instruments
The U.S. Export-Import Bank (Ex-Im) supports small business export transactions by offering
export credit insurance, working capital guarantees, and direct loans, particularly to SMEs’
foreign customers. In 2013, Ex-Im authorized a record 3,413 small business transactions, of
which the bulk, or 83.4 percent, were export credit insurances rather than working capital loan
guarantees (figure 8). Ex-Im authorizations supported $5.2 billion in small business loans, of
which 54 percent went towards export credit insurance and 35 percent towards working capital
loan guarantees (figure 9). Overall, in dollar terms, Ex-Im’s small business portfolio is about a
fifth of the total, even though small business transactions consistently make up over 80 percent
of transactions (figure 10). Ex-Im transactions overall support only a small share of U.S. exports,
typically 1-2 percent.
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Figure 8 – Number of Ex-Im Bank-Supported Export-Related Loan Authorizations to
Small Businesses in 2000-2013
Source: Ex-Im Bank annual reports, 2000-2013.
Figure 9 – $ Value of Ex-Im Bank-Supported Export-Related Loan Authorizations to
Small Businesses in 2000-2013
Source: ExIm Bank annual reports, 2000-2013.
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Figure 10 – ExIm Bank-Supported Export-Related Loan Authorizations to Small
Businesses in 2000-2013 as % of all Authorizations
Source: ExIm Bank annual reports, 2001-2013.
2.3
Perceptions of Loan Availability
The perceptions of small businesses and banks on availability of loans differ somewhat. In June
2012, the Federal Reserve Board of Governors asked loan officers to describe their current loan
standards “using the range between the tightest and easiest that lending standards at your bank
have been between 2005 and the present.”17 For non-syndicated loans to small firms with annual
sales of less than $50 million, 39.3 percent said that standards were tighter than the midpoint of
the range, while only 23 percent said they were easier than the midpoint of the range. However,
banks have recently viewed the lending conditions as having improved in the past two years
(figures 11-13).
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Figure 11 - Net Percentage of Domestic Respondents Tightening Standards for C&I Loans,
1990-2013
Source: Federal Reserve Board.
Figure 12 - Net Percentage of Domestic Respondents Increasing Spreads of Loan Rates
over Banks' Cost of Funds
Source: Federal Reserve Board.
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Figure 13 - Net Percentage of Domestic Respondents Reporting Stronger Demand for C&I
Loans
Source: Federal Reserve Board.
On the SME side, the majority still consider it harder to secure loans (figure 14) – which may
also help explain the recent years’ subdued borrowing. However, the ratio of those considering it
easier to secure loans to those seeing it harder is shrinking. At the end of 2013, a net of 7 percent
of small businesses saw the availability of loans as reduced, in contrast to some 15 percent in
early 2010.
A similar trend occurs in the Wells Fargo/Gallup Small Business Index: in Q4 of 2013, 27
percent of small businesses stated that obtaining credit in the past 12 months had been “very
difficult” or “somewhat difficult”, significantly down from 37 percent in Q1 of 2012, but still
higher than 13 percent at the start of 2008 (figure 15).
For export-driven companies, these trends are compounded by a profound lack of understanding
of financial instruments and government programs aimed at exporters. In a 2013 survey by the
National Small Business Association (NSBA), as many as 82 percent of small businesses already
engaged in exporting reported that their lending institution never discussed U.S. Export-Import
Bank products with them, and some 22 percent had never even heard of the Ex-Im Bank.18 Only
12 percent reported using an Ex-Im product to help finance their export activities, and just 5
percent had used Ex-Im financing through a commercial bank. In addition, a mere 3 percent had
made use of SBA’s export lending programs.
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Figure 14 – SMEs’ Perceived Availability of Loans – Net Percent (“Easier” Minus
“Harder”) Compared to Three Months Ago
Source: NFIB Small Business Economic Trends Monthly Report, January 2014.
Figure 15 – SMEs’ Perceived Difficulty of Obtaining Credit in the Past 12 Months
Source: Wells Fargo and Gallup Small Business Survey Topline Quarter 4, 2013 (margin of error ± 4 percentage
points).
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2.4
Remaking SME Finance: Rise of Online Nonbank Lenders
As traditional sources of small business credit have dried up, SMEs have turned to alternative
sources, first and foremost online to technology-enabled financing platforms that have
proliferated in the past few years. These platforms offer speed and higher odds of success than
traditional lenders, approving an estimated two-thirds of the loan applications they receive within
minutes or a few days. They also typically use a wider or a different set of criteria than do
traditional lenders to assess the borrower’s credit worthiness, such as analyzing the business
owners’ credit card payment records. In exchange for the speed and convenience, borrowers
typically pay a premium in the form of higher interest rates.
Select, high-growth online platforms for small business loans include such direct loan providers
as OnDeck that offers small business loans of up to $250,000 across industries, and
intermediaries such as Biz2Credit and Boefly that match small businesses to lenders across the
nation. There are non-profit models, such as microlender Accion. An additional source of
financing for small business is peer-to-peer lending platform such as LendingTree or Lending
Club, which target individuals instead of business borrowers. Small businesses have reportedly
used these platforms for small loans (typically up to $35,000 or so) to fund expansion or pay off
debt. Some peer-to-peer lenders, such as Dealstruck, have focused solely on the small business
market offering loans of $50,000-250,000 for up to 3 year terms with interest rates of 5-15
percent. Granted, all of these lenders require the businesses to meet certain criteria, such as cash
flow, profitability, certain amount of time in business, and so on.
In addition to these platforms offering a variety of financing instruments for an array of
businesses, there are specialized providers serving a defined clientele. For example, in the fall of
2013, Paypal started extending small business working capital loans to its merchants, and Google
also reportedly has plans to lend to small businesses. There are also new accounts receivable
companies extending financing against domestic and foreign receivables, and merchant cash
advance companies, such as Kabbage. New lending players such as Lighter Capital focuses on
high-growth software and tech firms, offering royalty-based loans that accommodate fluctuations
in the company’s cash flows.
Non-bank online lending accentuated in late-2013 during the government shutdown, which not
only brought SBA-backed lending to a halt, but also undercut non-SBA lending as the IRS was
closed and not verifying borrowers’ revenue figures. A notable longer-term trend favoring online
platforms is the growth in the number of entrepreneurs using mobile to apply for funding –
which is something that the non-traditional lending platforms are better-equipped to
accommodate than are traditional lenders. Credit unions in particular have yet to embrace online
let alone mobile platforms, and are as a result argued to lose countless opportunities.
Table 1 provides an illustrative list of various lenders and their focus. In addition to these has
also been loan-based crowdfunding platforms; these will be discussed below.
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Table 1 – Illustrative List of Online Non-Bank SME Lenders
Provider
OnDeck
Biz2Credit
Boefly
Instruments
Loans - direct
Array of loans, lines
of credit, and other
instruments - loan
request will be
matched to the
lending criteria of our
network of over
1,200+ lenders
Loans - loan request
will be matched to the
lending criteria of our
network of over
3,600+ lenders
Interest
rate
Amounts
Term
$5,000 $250,000
3 – 18
months
(average
6-9
months)
15% (avg)
$5,000 $1 million
Varies
Varies
Sectors
Website
Daily
Over 700 different
industries, including
restaurants, retailers
and other service
providers
https://www.on
deck.com/
Varies
Varies
Various sectors and
segments (women,
veterans, etc.)
http://www.biz
2credit.com/
Varies
Platform
user fee
$249
(minimum)
Varies
Typically franchisors
http://www.boe
fly.com/
10.9915.99%,
closing
costs 5%,
$135
application
fee
Varies
Established and
emerging businesses;
start-ups; businesses
in food, beverage,
hospitality industries
http://www.acc
ionusa.org/
Varies
Several:
manufacturing,
services, wholesale,
retail
https://www.de
alstruck.com
Monthly
Various
https://www.ka
bbage.com/
Based on
receipts
Paypal merchants
(90,000 firms)
https://www.pa
ypal.com/weba
pps/workingca
pital/tour
Monthly
Software, technology
and knowledgebased companies
http://www.lig
htercapital.com
/
Monthly
Various
http://www.acc
ountsreceivable
financing.com/
Microloans
Up to
$50,000
Up to 60
months
Dealstruck
Peer-to-peer loans
$50,000$250,000
Up to 3
years
Kabbage
Cash advance to buy
inventory, equal
monthly transfers
$500$50,000
Working capital loans
Max. 8
percent of
merchant's
annual
receipts,
up to
$20,000
Lighter
Capital
Royalty-based loans
$25,000$500,000,
or 10-20
percent of
company's
annualize
d runrate
1-5 years
Percent of
monthly
top-line
revenue; up
to 25%
Accounts
Receivable
Financing
Accounts receivable
financing, including
overseas
N/A
N/A
1-3% per
month
Accion
Paypal
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Flexible
5-15%
2-10% in
the first 2
months, 1%
thereafter
Set fee as a
deduction
of 10-30%
of incoming
receipts
until paid estimated
as 4-12%
interest
Payment
18
2.5
Boosting SMEs’ Cash Flow: Rise of Supply Chain Finance
Supply Chain Finance (SCF) has existed for a long time. However, the credit constraints in the
wake of the financial crisis have made SCF increasingly attractive option for financing SME
suppliers in corporate value chain, as a means to enhance suppliers’ cash flow.
SCF is typically initiated by a large corporate buyer to reduce supplier risk. Large buyers
increasingly want better terms, such as a longer payment cycle, from their supplier. Yet meanwhile
these suppliers need to be paid so as to purchase new supplies and cover business expenses.
Typically, the SMEs make up for the gap in cash flow by borrowing against their accounts
receivable. However, the terms involved in this arrangement can be very taxing on the supplier’s
financial viability – which in turn poses a supplier risk to the buyer.
In order to preserve the supplier’s financial health, the buyer helps the SME supplier access more
affordable credit through a bank, or offers a sophisticated corporate solution that optimizes
payments among many participants in the supply chain. Using SCF, the corporate buyer is able to
pay SME suppliers faster, thus helping the SMEs improve cash-flow and secure financing at lower
cost. This in turn fuels the SMEs’ operations, making them more stable and reliable and thereby
reducing the large buyer’s supplier risk. The set-up is a win-win-win: buyers get terms extensions,
suppliers’ liquidity, and banks access to short-term commercial trade-related transactions.
According to several estimates, only a fraction of the need for global supply chain finance has as
yet been met. New firms have sprouted to specifically address this gap, such as PrimeRevenue,
which provides multi-bank supply chain finance, and Tradeshift, which enables businesses that
have invoiced a large enterprise to immediately access the money they are owed once the buyer
has confirmed its intention to pay.
Several governments, including U.S. government, have established supply chain finance initiatives
in order to incentivize uptake by corporate buyers and banks. Some initiatives are explicitly related
to exporters and indirect exporters. For example, in 2011, the U.S. Export-Import Bank approved
a $740 million program to offer guarantees for up to 90 percent of that capacity to support Boeing’s
U.S. suppliers (that are also indirect U.S. exporters and hence supported by Ex-Im Bank).19 The
initiative forms part of Ex-Im Bank’s Supply-Chain Finance Guarantee Program, which enables
suppliers to receive early payment of their accounts receivable that are due from participating
exporters, such as Boeing, Caterpillar, and Case Holland in exchange for a small discount fee that
is paid to the lender. Ex-Im Bank provides a 90 percent guarantee of the invoices while the lender
(Citibank for Boeing suppliers) bears 10 percent of the risk.
In the UK, the government reached an agreement in September 2013 with three dozen corporations
such as Rolls-Royce, Vodafone, and General Dynamics UK to boost supply chain finance. The
bank is notified by a large company that an invoice has been approved for payment; the bank is
then able to offer a 100 percent immediate advance to the supplier at lower interest rates, knowing
the invoice will ultimately be paid by the large company.
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3. For Venture Capital, Bigger Is Better
The dot-com bubble of late 1990s saw venture capital spending in the United States reach its
peak in 2000 with total spending of more than $105 billion across 8,000 deals.20 After the dotcom crash of 2000, the venture capital industry struggled to raise new funds, resulting in
decreased VC funding of $19 billion in 2003. VC funding increased at a compounded annual
growth rate of 13 percent until 2007, when the financial crisis and the ensuing economic
downturn stalled this growth in its track. Since 2009, the overall venture capital funding in the
United States has remained at a relatively steady level, and is reportedly picking up on the back
of declined investor interest in emerging markets.21
3.1
Stage of Development
The breakdown of venture capital investments by stage of development of has changed over the
last twelve years. Funding at the seed level continues to be smallest proportion of venture capital
funding in the United States (figure 15). Expansion-stage funding, which was the recipient of the
biggest proportion of VC investments has seen its share of total funding decline over the years.
Early and Later stage funding has steadily extracted bigger chunk of the total VC pie.
Figure 15 – U.S. Venture Funding by Stage of Development
Source: Money Tree report from PwC and NVCA.
Seed-stage investments that once touched $3.2bn during the peak of the dot-com bubble have
seen ups and downs over the last decade. While funding for seed stage investment improved as
the economy recovered during 2003-07, it has seen a gradual decline since the financial turmoil,
resulting in total number of deals in seed funding declining from 536 in 2008 to 143 at the end of
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Q3 in 2013 (figure 16). Per the Money Tree report from PwC and NVCA, the average Seed deal
up until Q3 in 2013 was $3.5 million, up 21 percent from Q3 of 2012.
Early-stage dollar investments rose in 2011 to their highest level ($8.9 billion) since the dot-com
crash. This upward trend was visible in 2012, which saw the highest number of early stage deals
invested in by U.S. venture capitalists. In Q1-3 of 2013, early-stage deals received $6.8 billion.
The average early-stage deal up until Q3 in 2013 was $4.7 million, down 4.9 percent from Q3 of
2012.
Figure 16 - U.S. Venture Capital Seed / Early Stage Funding
Source: Money Tree report from PwC and NVCA.
Expansion-stage investments attracted the biggest piece of the pie in 2000, have decreased since
then and been at relatively steady levels since 2010 (figure 17). Overall, Expansion stage dollar
investments accounted for 32 percent of all venture investments in 2012, up 1.2 percent from the
previous year. The average expansion stage deal was $9.8 million in Q3 2013, identical to the
average expansion stage deal in 2012.
VC investments in later-stage deals have decreased almost 72 percent since 2008. In 2012, 22
percent of all venture deals were attributed to later-stage deals. The average later-stage deal was
$11.5 million in Q3 2013, up 9.7 percent from Q3 2012.
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Figure 17 – U.S. Venture Capital Later / Expansion Stage Funding
Source: Money Tree report from PwC and NVCA.
3.2
Industry Analysis
High-Tech
Due to the less capital intensive nature of the business, the Software industry has traditionally
captured the highest VC dollars among the high-tech industries. The Software industry received
the largest investment in 2012 with $8.6 billion going into 1,369 deals, representing a 109
percent increase in dollars and 65 percent increase in deals since 2009 (figure 18). The
biotechnology industry received the second highest VC dollars in 2013 but the overall VC
dollars have stayed relatively flat declining only 3 percent since 2000. The medical device
industry has received the third largest investment from venture capitalists since 2005 peaking in
2007 with $2.7 billion.
The semiconductor industry has declined the most since the dot-com crash, recovering briefly
before tumbling again in 2009. A number of factors including uncertain global economy,
ongoing inventory overhang, and a shift from PCs to mobile devices caused a downward trend
for the semiconductor industry. The 2013 year-to-date (Q3) VC dollars invested declined 27
percent when compared with the first three quarters from 2009.
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Figure 18 – U.S. High Tech Venture Capital Funding
Source: Money Tree report from PwC and NVCA.
Non-High Tech
Venture capital investment in non-high tech industries has traditionally been lower when
compared with the high tech industry. The media and entertainment industry VC funding, which
reached its lowest point in 2003, has recovered steadily since then increasing at a 13 percent
compounded annual growth rate from 2003-2012 (figure 19). The energy and industrial sector
which peaked in 2008 with dollar investments $4.6 billion declines 37 percent from 2008 to 2012
and continues decline in 2013 with only 165 deals closed by the end of third quarter. The
Consumer Products and Services sector has attracted the third largest share of investment since
2008. From a low of $157 million in VC dollar investments in 2003, VC investments increased
at a compounded annual growth rate of 27 percent to $1.3 billion in 2012.
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Figure 19 – U.S. Non-High Tech Venture Capital Funding
Source: Money Tree report from PwC and NVCA.
Business Products and Services, Retailing and Distribution, and Healthcare services have seen
the most declines over the last decade. The Business Products and Services industry had its
highest share of VC investments since the dot-com crash in 2006, but has declined 74 percent in
year-to-date (Q3) dollar investments in 2013 when compared with the same time period in 2006.
The healthcare services sector saw robust growth in VC investments after the Affordable Care
Act was announced in 2009. VC investments have since declined 34 percent in dollar
investments and 19 percent in deals year-over-year during the first three quarters of 2013.
3.3
Region
VC dollars invested in the United States continue to be dominated by Silicon Valley. The
proportion of dollars being invested in Silicon Valley has increased from 32 percent in 2000 to
42 percent today (figure 20). While a distant second, New England region continues to hold
steady, with 11 percent of VC dollars invested in 2013 flowing through to this region. The New
York Metro region comes in a close third and has held steady attracting 8-10 percent dollars
invested over the last decade. VC investment in the southern California region of LA and Orange
County VC has been relatively flat at approximately 6 percent since the dot-com bubble era.
Interestingly, the southeastern region of United States that accounted for almost 8 percent VC
investment in 2000, today attracts only 4 percent of the total dollars invested in the United States.
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Figure 20 - Proportion of Amount Invested by Region
Source: Money Tree report from PwC and NVCA.
3.4
Venture Capital Spending Comparison: U.S. vs. Other OECD Countries
Venture capital investments, representing the riskiest ownership in an entity, has accounted for a
very small fraction of the GDP for most countries. Among the OECD countries, Israel and
United States represented the highest VC spending as a percentage of GDP in 2012 (figure 21).
Notably, the two countries differ in VC spending split between early and late stage companies.
While early stage companies attracted 84 percent of total VC spending in Israel, only 32 percent
of VC spending in the United States went towards early stage firms.
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Figure 21 - Venture Capital Investments as % of GDP – 2012
Source: OECD Entrepreneurship at a Glance 2013.
The harsh effects of the financial crisis of 2008 on VC spending were felt strongly by the OECD
countries. According to OECD data, VC spending in most countries remains significantly below
the 2007 levels (figure 22). Portugal and Spain, the two European countries embroiled in the
European debt crisis continue to attract the least amount of VC dollars spent in 2012. The United
States VC spending grew 19.7 percent from 2009 to 2012. However, this amount was still 16.4
percent lower than the 2007 level. Ireland, Luxembourg, and South Africa were the only three
OECD countries in 2012 to exceed the VC spending levels of 2007.
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Figure 22 - Trends in Venture Capital Investments 2007 – 2012
Source: OECD Entrepreneurship at a Glance 2013.
4. Angels: Reaching a Par with VCs
As venture capital has moved to bigger deals, angels have filled the gap for startups. Angel
market has also recovered steadily since 2008. In the first two quarters of 2013, periods for
which data are available through the Center for Venture Research at the University of New
Hampshire, the angel investor market showed signs that a sustainable growth. Angels invested a
total of $9.7 billion, an increase of 5.2 percent over the first half of 2012 and 5 percent increase
from 2007 (figure 23).
A total of 28,590 ventures received angel funding in the first half of 2013, a 4.8 percent increase
from the first half of 2012, and the number of active investors was 134,895 individuals, up by 2.9
percent from the first half of 2012 (figure 24). The increase in total dollars and the matching
increase in total investments resulted in an average deal size of $337,850.
Much like VCs, angels too have migrated somewhat away from seed and start-up stage investing.
In the first half of 2013, only 38 percent of angel investments went in the seed and start-up stage
companies. This is positive for companies starting out, but also significantly below the pre-2008
peak of 55 percent, with angels having moved toward expansion and growth capital financings,
and positioning their investments for growth in 2014.
Still a relatively limited number of ventures received angel backing. In the first half of 2013, the
share of deals that angels’ invested in of all deals brought to angels was 21.5 percent, an increase
from the first half of 2012 (17.8 percent) and comparable to 2012 (21.3 percent) (figure 25).
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Sectorally, software claims the largest share of angel investments, with 24 percent of total angel
investments in first half of 2013, followed by healthcare services/medical devices and equipment
(21 percent), industrial/energy (10 percent), retail (8 percent), biotech (8 percent) and IT Services
(6 percent) (figure 26). The consistently solid performance of the industrial/energy sector is
telling of angels’ growing interest in clean tech investing.
In the first half of 2013, women angels represented 18.2 percent of the angel market, and
women-owned ventures accounted for 15.9 percent of the entrepreneurs that are seeking angel
capital. 23.6 percent of these women entrepreneurs received angel investment in the first half of
2013, above the overall market acceptance rate. Minority angels made up 4.5 percent of angles
and minority-owned firms 8.5 percent of the entrepreneurs seeking angle investment, with an
acceptance rate of 14.7 percent, which lags behind the market yield rate. Angel investments
continue to contribute to job growth with the creation of 111,500 new jobs in the United States in
first half of 2013, or 3.9 jobs per angel investment.
Figure 23 – Angel Investments in 2002-2012, by amount invested and average deal size
Source: Center for Venture Research at the University of New Hampshire.
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Figure 24 – Angel Investments in 2002-2012, by number of ventures financed and number
of angels
Source: Center for Venture Research at the University of New Hampshire.
Figure 25 – Angel Investments in 2002-2012, by acceptance rate (deals financed over deals
brought to angels)
Source: Center for Venture Research at the University of New Hampshire.
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Figure 26 – Angel Investments in Q1-2 of 2013, by sector
Source: Center for Venture Research at the University of New Hampshire.
5. Crowdfunding Is Coming to Equity Markets
Crowdfunding, which enables small companies to sell small amounts of equity to individual
investors, gained steam in 2013. While comprehensive data on crowdfunding has yet to be
collected, according to recent estimates, the global crowdfunding volume nearly doubled in 2012
to $2.7 billion, of which over one-half, or $1.6 billion, was in North America (figure 27).
Crowdfunding is expected to exceed $5 billion in 2013. Initially focused on creative,
philanthropic, and social endeavors, crowdfunding has more recently been applied to business
and entrepreneurial ventures, which currently make up approximately 17 percent of all
crowdfunding investments (figure 28).
As securities regulations have become more flexible in the United States and abroad,
crowdfunding is expanding from donation-, and reward-based models to lending- and equitybased models. Several crowdfunding platforms have emerged, targeting specific stages and
sectors such as startups or consumer brands (for an illustrative list, please refer to:
http://anentrepreneuriallife.com/crowdfunding-sites-the-ultimate-list-for-entrepreneurs/).
The equity-based model in particular is to take center stage in the United States, after the passage
of the JOBS Act, which has approved general solicitation over the Internet. The two most
transformative pieces of the JOBS Act legislation are Titles II and III. Title II, which allows
companies raising capital to advertise and market their raise online, passed on September 23,
2013; Title III, which will allow non-accredited investors to make investments in exchange for
equity, is still pending. The equity-based models, which tend to favor larger financings, grew by
30 percent in 2011-2012; currently, some 42 percent of equity-based crowdfunding investments
are above $100,000 range (figure 29). The growth in lending volumes mainly stemmed from
crowdfunded micro-loans and community-driven loans to local SMEs.
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Figure 27 - Growth in Worldwide Funding Volume, in Millions of Dollars - Research
Estimate
Source: Massolution
Figure 28 - Crowdfunding Performance by Investment Category, 2012
Source: Massolution.
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Figure 29 - Funds Paid Out Per Equity-Based Project as %, 2011
Source: Massolution, based on 10 Crowdfunding Platforms.
6. Conclusion: What Lies Ahead for 2014?
Financing for SMEs appears to be recovering from the immediate post-recession years.
However, the more traditional sources of SME capital – banks for loans and VCs for early-stage
funding – are focusing on larger and less nascent companies. A number of instances and new
delivery methods are taking their place, from online micro- and small business lenders to supply
chains finance programs, angel investors, and crowdfunding platforms.
The summary highlights of this report are as follows:

Bank lending to SMEs has improved, but has yet to return to pre-crisis levels. In June
2013, the loan balances for commercial and industrial (C&I) loans of $1 million or less
stood at $288.7 billion, $47 billion below June 2008.

Federal government sources have played a complementary and to an extent
countercyclical role during the past few years in SME lending. In FY 2013, SBA
supported $29.6 billion in lending to small businesses, about the levels of the prior two
years. The Export-Import Bank supported export credit insurances and export working
capital for SMEs at $5.2 billion in 2013, somewhat below 2011-12 authorizations.

The burgeoning market of online lenders has yet to be analyzed fully, but the success of
several platforms indicates a new, strong, and relatively affordable source for financing
particularly for small firms that lack access to sufficient bank credit.
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
Expansion- and Late-stage investments together accounted for $13.4 billion of VC
investments through Q1-Q3 of 2013. Seed- and Early-Stage investments attracted 46
percent less investments during the same time period amounting to a total of $7.2 billion.
The Software industry continues to garner the most VC dollars in the United States, while
Silicon Valley continues to dominate the US VC investments by geography, leading the
pack with 42 percent investments in 2013. Internationally, Israel and United States
remain the hotbeds of innovation with the highest VC spending as a percent of GDP
among the OECD countries in 2012.

Angel investment is recovering and has become a strong complement to VC financing. In
the first two quarters of 2013, angels invested a total of $9.7 billion, an increase of 5.2
percent over the first half of 2012 and 5 percent increase form 2007.

Global crowdfunding volume nearly doubled in 2012 to $2.7 billion, of which over onehalf, or $1.6 billion, was in North America. Crowdfunding is expected to exceed $5
billion in 2013.
As the U.S. economy recovers, 2014 appears to become a big year for alternative lenders and
investors on the online and crowdfunding spaces, and see their expansion also to mobile
platforms. However, bank financing to SMEs is expected to continue subdued as Basel III capital
adequacy requirements come into effect in 2015. Because banks will have to hold additional cash
in reserve to meet the terms of Basel III, they will have less money to lend compared to pre-crisis
levels, which is expected to have a disproportionately negative effect on SME financing
opportunities. This however will open up opportunities for new business models to accommodate
the recovering financing demands by American SMEs.
TradeUp, January 2014
33
TradeUp, January 2014
American Express Co.
First Citizens Banchares
Wintrust Financial Corp.
Zions Bancorp
Synovus Financial Corp.
BB&T Corp.
FNB Corp.
Capital One Financial Corp.
Fulton Financial Corp.
Regions Financial Corp.
U S Bancorp.
First Niagara Financial Grp.
Lauritzen Corp.
Huntington Bancshares Inc.
Bancorpsouth Inc.
TCF Financial Corp
GE Capital Retail Bk*
JPMorgan Chase & Co
Citigroup
Popular
Hancock Holding Company
M&T Bk Corp
Bank of Amer Corp
Central Bancompany
Arvest Bk Grp.
Compass Bk
Wells Fargo & Co
PNC Financial Svc. Group
Bank of The West
BMO Harris Bank NA
Name of Lending Institution
HQ
1
State Rank TA Ratio
(1)
(2)
NY
1
0.238
NC
2
0.187
IL
3
0.169
UT
4
0.118
GA
5
0.162
NC
6
0.053
PA
7
0.128
VA
8
0.028
PA
8
0.129
AL
10
0.061
MN
11
0.042
NY
11
0.072
NE
13
0.071
OH
13
0.069
MS
15
0.125
MN
16
0.094
UT
17
0.042
NY
18
0.019
NY
19
0.013
PR
19
0.071
MS
19
0.092
NY
22
0.068
NC
23
0.020
MO
24
0.110
AR
25
0.086
AL
26
0.049
CA
27
0.029
PA
28
0.036
CA
29
0.047
IL
30
0.042
Ratio1
(3)
1.000
0.491
0.384
0.261
0.381
0.253
0.416
0.316
0.348
0.219
0.205
0.288
0.337
0.222
0.404
0.370
1.000
0.219
0.262
0.258
0.299
0.178
0.182
0.389
0.345
0.172
0.146
0.143
0.209
0.201
TBL
Amount
($1,000)
(4)
16,350,038
3,914,507
2,842,793
6,231,770
4,227,168
9,408,732
1,475,506
9,105,726
2,133,209
7,386,970
14,632,161
2,530,706
1,142,096
3,914,846
1,646,169
1,676,064
1,133,624
25,003,294
9,081,426
2,464,690
1,775,410
5,560,491
31,042,181
1,113,344
1,167,974
3,445,358
34,570,389
10,537,942
3,645,716
3,849,439
All Small Business Lending
(less than $1 million)
(5)
3,603,226
117,702
136,801
52,612
22,675
506,879
25,011
2,914,573
20,080
63,394
870,931
32,530
101,941
34,732
15,882
19,823
716,231
2,893,892
1,746,916
22,703
18,706
56,151
3,277,274
14,445
14,601
169,539
617,508
220,200
38,919
46,887
Number
Lender
Asset Size
(6)
>$50B
$10B-$50B
$10B-$50B
>$50B
$10B-$50B
>$50B
$10B-$50B
>$50B
$10B-$50B
>$50B
>$50B
$10B-$50B
$10B-$50B
>$50B
$10B-$50B
$10B-$50B
>$10B
>$50B
>$50B
$10B-$50B
$10B-$50B
>$50B
>$50B
$10B-$50B
$10B-$50B
>$50B
>$50B
>$50B
>$50B
>$50B
Amount
($1,000)
(7)
16,318,089
378,394
800,526
526,206
539,666
1,922,393
247,853
5,872,601
187,652
1,617,601
4,859,559
446,838
501,648
635,757
206,856
300,863
1,133,624
13,410,165
5,587,076
164,682
194,239
1,087,373
14,191,509
148,800
173,673
613,869
8,416,000
2,103,528
592,967
424,404
(8)
3,603,088
105,081
126,455
32,973
9,593
473,449
17,810
2,900,077
9,909
41,677
828,856
23,841
97,542
20,531
9,441
11,240
716,231
2,836,551
1,732,920
11,809
11,452
37,405
3,220,135
10,113
9,471
158,533
510,097
184,380
28,097
33,066
Number
Micro Business Lending
(less than $100,000)
Amount
($1,000)
(9)
31,949
3,536,113
2,042,267
5,705,564
3,687,502
7,486,339
1,227,653
3,233,125
1,945,557
5,769,369
9,772,602
2,083,868
640,448
3,279,089
1,439,313
1,375,201
11,593,129
3,494,350
2,300,008
1,581,171
4,473,118
16,850,672
964,544
994,301
2,831,489
26,154,389
8,434,414
3,052,749
3,425,035
(10)
138
12,621
10,346
19,639
13,082
33,430
7,201
14,496
10,171
21,717
42,075
8,689
4,399
14,201
6,441
8,583
57,341
13,996
10,894
7,254
18,746
57,139
4,332
5,130
11,006
107,411
35,820
10,822
13,821
Number
Macro Business Lending
($100,000 - $1 million)
CC
Amount/TA1
(11)
0.28
.
0
0
0.01
0
.
0.25
.
0.01
0.05
.
.
0
.
0
.
0.06
0.1
0.03
0
0
0.07
.
.
0.01
0.01
0.01
0
0
Small Business Lending of Large Lending Institutions Based on Call Report Data, June 2012
APPENDIX I:
34
TradeUp, January 2014
35
Umpqua HC
T D Bk NA
Cullen/Frost Bkr
First Horizon Nat Corp.
Commerce Bancshares
Suntrust Bk
Susquehanna Bancshares
Associated Banc Corp.
Fifth Third Bancorp
Keycorp
Prosperity Bancshares
Firstmerit Corp.
Valley Nat Bancorp
Webster Financial Corp.
Peoples United Bk
RBS Citizens NA
Sovereign Bk NA
Discover Financial Services
East W Bancorp
Comerica
Ally Financial
Iberiabank Corp.
Firstbank Holding Company
Barclays Bk DE
Rabobank NA
UMB Financial Corp
Cathay Gen. Bancorp
GE Capital Bk
International Bshrs Corp.
Signature Bk
BOK Financial Corp
Name of Lending Institution
HQ
1
State Rank TA Ratio
(1)
(2)
OR
31
0.110
DE
32
0.030
TX
33
0.067
TN
34
0.052
MO
34
0.051
GA
36
0.036
PA
37
0.068
WI
38
0.059
OH
39
0.035
OH
40
0.038
TX
40
0.065
OH
42
0.078
NJ
43
0.074
CT
44
0.057
CT
45
0.066
RI
46
0.023
DE
47
0.032
IL
48
0.003
CA
49
0.065
TX
50
0.046
MI
51
0.022
LA
52
0.063
CO
53
0.036
DE
54
0.007
CA
55
0.051
MO
56
0.051
CA
57
0.068
UT
58
0.054
TX
59
0.042
NY
60
0.041
OK
61
0.038
Ratio1
(3)
0.255
0.192
0.238
0.213
0.268
0.142
0.222
0.191
0.114
0.139
0.405
0.218
0.208
0.222
0.157
0.108
0.126
1.000
0.160
0.089
0.066
0.183
0.308
0.972
0.172
0.188
0.144
0.069
0.212
0.170
0.129
TBL
Amount
($1,000)
(4)
1,264,035
6,197,769
1,411,367
1,315,603
1,058,791
6,179,640
1,221,505
1,279,224
4,051,406
3,186,664
699,037
1,138,055
1,180,078
1,111,695
1,856,969
3,241,138
2,796,643
206,777
1,350,924
2,839,695
1,964,564
758,549
434,896
114,360
599,000
684,053
707,069
735,067
478,638
658,569
959,892
All Small Business Lending
(less than $1 million)
(5)
9,351
56,364
11,708
27,253
25,561
57,543
10,307
28,926
71,778
58,231
4,936
6,599
5,034
13,799
12,948
62,262
34,502
112,259
5,039
16,366
68,244
5,125
7,076
26,447
9,943
4,552
3,134
17,830
4,230
3,136
4,390
Number
Lender
Asset Size
(6)
$10B-$50B
>$50B
$10B-$50B
$10B-$50B
$10B-$50B
>$50B
$10B-$50B
$10B-$50B
>$50B
>$50B
$10B-$50B
$10B-$50B
$10B-$50B
$10B-$50B
>$10B
>$50B
>$50B
>$50B
$10B-$50B
>$50B
>$50B
$10B-$50B
$10B-$50B
$10B-$50B
$10B-$50B
$10B-$50B
$10B-$50B
>$10B
$10B-$50B
>$10B
$10B-$50B
Amount
($1,000)
(7)
97,474
607,176
146,892
193,649
141,422
1,211,554
107,814
114,220
529,222
618,444
65,093
72,983
46,789
195,179
158,228
749,241
607,928
206,777
20,523
182,858
1,741,122
50,189
33,664
112,694
77,000
56,126
40,574
293,449
63,952
48,718
76,018
(8)
4,764
34,709
5,664
21,766
21,129
38,709
5,054
16,185
56,554
46,548
2,370
2,505
1,523
8,562
6,439
51,728
20,916
112,259
919
6,635
67,679
2,317
5,740
26,443
7,870
2,222
1,147
15,274
2,522
1,392
2,165
Number
Micro Business Lending
(less than $100,000)
Amount
($1,000)
(9)
1,166,561
5,590,593
1,264,475
1,121,954
917,369
4,968,086
1,113,691
1,165,004
3,522,184
2,568,220
633,944
1,065,072
1,133,289
916,516
1,698,741
2,491,897
2,188,715
1,330,401
2,656,837
223,442
708,360
401,232
1,666
522,000
627,927
666,495
441,618
414,686
609,851
883,874
(10)
4,587
21,655
6,044
5,487
4,432
18,834
5,253
12,741
15,224
11,683
2,566
4,094
3,511
5,237
6,509
10,534
13,586
4,120
9,731
565
2,808
1,336
4
2,073
2,330
1,987
2,556
1,708
1,744
2,225
Number
Macro Business Lending
($100,000 - $1 million)
CC
Amount/TA1
(11)
.
0
.
0.01
.
0
.
0
0.02
0
.
.
.
0
0
0.01
0
.
0
0
.
.
.
.
.
.
0
.
.
.
0
TradeUp, January 2014
36
Micro Business Lending
(less than $100,000)
TBL
HQ
Amount
Lender
Amount
1
Number
Number
State Rank TA Ratio
Ratio1
($1,000)
Asset Size
($1,000)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
First Bancorp
PR
62
0.048
0.136
607,796
2,919 $10B-$50B
42,713
1,298
Union Bk NA
CA
63
0.016
0.063
1,372,869
11,632 >$50B
195,528
7,316
BankUnited
FL
64
0.031
0.202
381,448
3,098 $10B-$50B
63,209
2,090
Bank of HI Corp.
HI
65
0.019
0.204
256,052
3,820 $10B-$50B
62,413
3,112
State Farm Bk FSB
IL
66
0.011
0.164
163,053
18,808 >$10B
98,274
18,615
HSBC Bk USA NA
VA
67
0.006
0.058
1,126,858
19,558 >$50B
305,390
16,381
Washington Fed.
WA
67
0.013
0.239
174,663
984 >$10B
12,258
439
Scottrade Bk
MO
69
0.004
0.527
64,835
121 >$10B
144
2
Astoria FS & LA
NY
70
0.010
0.256
169,440
710 >$10B
5,764
292
Hudson City Svg Bk FSB
NJ
71
0.001
1.000
42,358
86 >$10B
221
13
Svb Financial Grp.
CA
72
0.019
0.079
390,367
5,182 $10B-$50B
29,565
3,458
UBS Bk USA
UT
73
0.014
0.139
588,440
1,765 $10B-$50B
19,037
417
City Nat Corp.
CA
74
0.021
0.068
514,444
3,595 $10B-$50B
46,777
1,505
Privatebancorp
IL
75
0.035
0.058
446,034
2,086 $10B-$50B
17,537
722
Northern Trust Corp.
IL
76
0.009
0.085
636,415
2,773 >$50B
23,984
680
USAA FSB
TX
77
0.000
1.000
436
2 >$10B
436
2
Investors Bancorp MHC
NJ
78
0.016
0.111
180,865
717 $10B-$50B
6,028
208
New York Cmnty BC
NY
79
0.011
0.064
495,681
1,410 $10B-$50B
6,227
171
First Republic Bk
CA
80
0.010
0.078
317,825
1,239 >$10B
14,440
344
Everbank
FL
81
0.011
0.104
159,411
652 >$10B
3,994
148
New York Private B&TR Corp.
NY
82
0.012
0.088
141,181
486 $10B-$50B
1,632
20
Morgan Stanley Bk NA
UT
83
0.003
0.041
261,157
834 >$50B
10,000
203
Flagstar Bk FSB
MI
84
0.007
0.069
94,100
405 >$10B
2,385
123
Onewest Bk FSB
CA
85
0.004
0.050
107,724
406 >$10B
356
22
Bank of NY Mellon Corp.
NY
86
0.000
0.048
55,544
351 >$50B
4,995
188
Goldman Sachs Group The
NY
87
0.000
0.001
4,000
6 >$50B
Deutsche Bk Tc Americas
NY
88
0.000
0.000
2,000
4 $10B-$50B
1
USAA Svg. Bank
NV
NR
0.000
1 >$10B
1
State Street Corp.
MA
NR
>$50B
E Trade Bk
VA
NR
>$10B
Charles Schwab Bk
NV
NR
>$10B
Third FS&LA
OH
NR
>$10B
*The bank was formerly known as GE Money Bank, and was renamed in October 2012.
1
TA = total domestic assets held by the lender; TBL = total business loans held by the lender; and CC=credit card loans held by the lender.
Source: U.S. Small Business Administration, Office of Advocacy, from Call Report data.
Name of Lending Institution
All Small Business Lending
(less than $1 million)
Amount
($1,000)
(9)
565,083
1,177,341
318,239
193,639
64,779
821,468
162,405
64,691
163,676
42,137
360,802
569,403
467,667
428,497
612,431
174,837
489,454
303,385
155,417
139,549
251,157
91,715
107,368
50,549
4,000
2,000
-
(10)
1,621
4,316
1,008
708
193
3,177
545
119
418
73
1,724
1,348
2,090
1,364
2,093
509
1,239
895
504
466
631
282
384
163
6
3
-
Number
Macro Business Lending
($100,000 - $1 million)
CC
Amount/TA1
(11)
0.03
0
.
0
.
0
.
.
.
.
0
.
0
.
0
.
.
.
.
.
.
.
.
.
0
0
0
.
0
.
.
.
References
Ayyagari, Meghana, Aslı Demirgüç-Kunt and Vojislav Maksimovic, 2006. “How Important Are Financing
Constraints? The Role of Finance in the Business Environment.” World Bank Policy Research Working Paper 3820.
See also, Zia, Bilal. 2007. “Export Incentives, Financial Constraints, and the (Mis)allocation of Credit: Micro-level
Evidence from Subsidized Export Loans.” Journal of Financial Economics, forthcoming; and Banerjee, Abhijit V.
and Esther Duflo. 2004. “Do Firms Want to Borrow More? Testing Credit Constraints Using a Directed Lending
Program.” CEPR Discussion Paper 4681.
1
Joe Peek, “The Impact of Credit Availability on Small Business Exporters” (Washington: Small Business
Administration Office of Advocacy, 2013).
2
Beck, Thorsten, Aslı Demirgüç-Kunt, Luc Laeven and Vojislav Maksimovic. 2006. “The Determinants of Financing
Obstacles.” Journal of International Money and Finance, 25, 932-52.
3
Beck, Thorsten, Aslı Demirgüç-Kunt, Luc Laeven and Vojislav Maksimovic. 2006. “The Determinants of Financing
Obstacles,” Journal of International Money and Finance, 25, 932-52.
4
World Bank Group, Enterprise Surveys Database, 2010.; http://www.enterprisesurveys.org; “World Business
Environment Survey” (WBES) of more than 10,000 firms in 80 countries.
5
Manova, Kalina. 2013. “Credit Constraints, Heterogeneous Firms, and International Trade.” The Review of
Economic Studies 80: 711-744.
6
See, for example, Bellone, Flora, Patrick Mussoy, Lionel Nestaz, and Stefano Schiavox. 2010. “Financial
Constraints and Firm Export Behaviour,” The World Economy 33, 3: 347-373; and Wagner, Joachim, 2012. “Credit
constraints and exports: Evidence for German manufacturing enterprises.” Working Paper Series in Economics and
Institutions of Innovation 286, Royal Institute of Technology, CESIS - Centre of Excellence for Science and
Innovation Studies.
7
Molina, Danielken and Monica Roa. 2013. “Export Margins and External Financing: Evidence from Colombia.”
Mimeo (October).
8
Campa J.M., Shaver J.M. 2002. “Exporting and capital investment: on the strategic behavior of exporters,”
Discussion Paper No. 469, IESE Business School, University of Navarra.
9
U.S. International Trade Commission. 2010. “Small and Medium-Sized Enterprises: Characteristics and
Performance.” Investigation No. 332-510. Publication 4189 (November)
<http://www.usitc.gov/publications/332/pub4189.pdf>. These findings are echoed by the 2012 GE Capital and Ohio
State University survey of SMEs with $10million to $1 billion in revenue. Although this survey did not specifically
ask firms about financing for cross-border trade, it did find that 55 percent of SMEs reported a lack of adequate
access to capital. See Fisher College of Business, Ohio State University, and GE Capital. 2011. “The Market That
Moves America: Insights, Perspectives, and Opportunities from Middle Market Companies”
<http://www.middlemarketcenter.org/wp-content/uploads/2012/01/The_Market_that_Moves_America4.pdf>.
10
U.S. International Trade Commission. 2010. “Small and Medium-Sized Enterprises: Characteristics and
Performance.”
Investigation
No.
332-510.
Publication
4189
(November)
<http://www.usitc.gov/publications/332/pub4189.pdf>.
11
12
OECD. 2008. Removing Barriers to SME Access to International Markets. Paris: OECD.
Ann Marie Wiersch and Scott Shane, “Why Small Business Lending Isn’t What It Used to Be,” Economic
Commentary /Cleveland Federal Reserve, 14 August 2013
http://www.clevelandfed.org/research/commentary/2013/2013-10.cfm.
13
TradeUp, January 2014
37
Bassett, William F. Seung Jung Lee, and Thomas W. Spiller. 2012. “Estimating Changes in Supervisory
Standards and Their Economic Effects,” Federal Reserve Board, Divisions of Research and Statistics and Monetary
Affairs, Finance and Economics Discussion Series, no. 2012-55.
14
Ann Marie Wiersch and Scott Shane, “Why Small Business Lending Isn’t What It Used to Be,” Economic
Commentary /Cleveland Federal Reserve, 14 August 2013
http://www.clevelandfed.org/research/commentary/2013/2013-10.cfm.
15
See “SBA Lending Activity in FY 2013 Shows SBA Continuing to Help Small Businesses Grow and Create
Jobs,” SBA, 29 October 2013 <http://www.sba.gov/content/sba-lending-activity-fy-2013-shows-sba-continuinghelp-small-businesses-grow-and-create-jobs>
16
Federal Reserve Board of Governors. 2012. “Senior Loan Officer Opinion Survey on Bank Lending Practices at
Selected Branches and Agencies of Foreign Banks in the United States“ (July) <
http://www.federalreserve.gov/boarddocs/snloansurvey/201208/table2.htm>.
17
National Small Business Association and Small Business Exporters Association, “2013 Small Business Exporting
Survey,” <www.nsba.biz/wp-content/uploads/2013/06/Exporting-Survey-2013.pdf> (October 16, 2013).
18
“Ex-Im Bank announces $740 million supply-chain program with The Boeing Company,” Export-Import Bank of
the United States Press Release, 17 February 2012.
19
MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association
(NVCA), based on data provided by Thomson Reuters.
20
“Investor Confidence in U.S. Grows as Sentiment Declines in Emerging Markets,” Press Release on the 2013
Global Venture Capital Survey, Deloitte and National Venture Capital Association, 14 August 2013.
21
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