Asset Quality
Small Business Loans
Small Business Loans are commercial credit extensions to businesses, typically under $1M individually. The category is dominated by community banks and is the primary basis for the Community Reinvestment Act small-business assessment.
Formula
The call report defines small-business loans for reporting purposes as: commercial and industrial loans of $1M or less, owner-occupied commercial real estate loans of $1M or less, and similar small-balance commercial credit. Loans are reported in three size brackets ($100K, $100K-$250K, $250K-$1M) to permit policy analysis.
Why it matters
Small-business loans are a primary CRA-evaluated activity for banks and the leading source of commercial credit in most US metropolitan areas. Community banks originate roughly 60% of small-business loans despite holding only about 15% of US bank assets, making the segment a focal point of small-bank policy advocacy.
How to interpret
Small-business loans / Total C&I loans is the more useful denominator. Community banks routinely run 40-70% of C&I as small business. Large banks may run under 10%. The trend reflects the gradual concentration of small-business credit at community banks as large banks have shifted toward larger commercial credits.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| > 50% of C&I | Small-business focused | Community-bank specialty. |
| 20–50% | Active | Diversified C&I book including small business. |
| 5–20% | Light | Larger-customer C&I focus. |
| < 5% | Minimal | Large-corporate-only commercial lending. |
Worked example
Frequently asked
Is the $1M threshold the SBA small-business definition?
No. The SBA defines small businesses by industry-specific revenue or employee counts. The $1M loan-size threshold is a call-report convention used for CRA and policy analysis — many true small businesses also have larger loans.
What is CFPB Section 1071?
A Dodd-Frank rule (finalized 2023) requiring banks to collect and report demographic data on small-business loan applications, similar to HMDA for mortgages. Implementation has been phased and the rule has faced industry litigation; first reporting was scheduled for 2024.
Why do community banks dominate small-business lending?
Local credit decisions, relationship-based underwriting, and willingness to handle smaller-ticket loans where the unit economics are challenging for large banks. The personal-banker model remains a competitive advantage in this product.
Sources
- FFIEC Call Report Schedule RC-C Part II
- CFPB Section 1071 small-business loan data collection rule
See Small Business Loans across 4,335 US banks
BankRegReports ranks every FDIC-insured institution by Small Business Loans, refreshed quarterly within 48 hours of FFIEC release.