Banks that specialize in small business lending, including large holding companies, are showing a higher return on equity than their counterparts says a report from the Office of Advocacy of the U.S. Small Business Administration (SBA). The report, which contradicts the conventional wisdom that large bank holding companies find small biz lending a less profitable operation, will be presented Thursday to the Federal Reserve Bank of Chicago?s 39th Annual Conference on Bank Structure and Competition.

?That?s good news for small business owners who may rely on small local banks for financing,? said Thomas M. Sullivan, Chief Counsel for Advocacy. Small banks have traditionally been one of the major suppliers of credit to small biz operators. With the advent of deregulation and consolidation, concerns have grown that this will adversely affect small business lending practices. Conventional wisdom says that because of higher risk and larger administrative costs (per each loan dollar) for lending to small companies, large bank holding companies will find this niche less profitable.

The report, authored by Dr. James Kolari of Texas A&M University, suggests that defining profitability either as return on equity or as return on assets determines whether small business lenders are more profitable than other banks. Using either method, small business lenders were shown to be no less profitable or more profitable than other banks.

Assessing the Profitability and Riskiness of Small Business Lenders in the Banking Industry, can be obtained online, by going to the following address: