Wells Fargo: We Re-Evaluate Declined Small-Biz Loans

The head of wholesale banking at Wells Fargo told a Congressional panel today that while the market for small business lending remains soft, it is improving with greater competition for “well-underwritten loan opportunities.”

David Hoyt also said that Wells Fargo is taking another look at small business loans it has declined as part of an effort to ensure that it makes “every good loan we can.”

Hoyt testified before the House Committee on Financial Services and Committee on Small Business about trends in the sector. He also outlined the recent efforts of Wells Fargo, one of the largest lenders in the nation.

“When lending to small businesses, we are taking time to re-evaluate the loans we have declined,” Hoyt said in prepared testimony made public on the bank’s website. “We take a second look at declined loans because we want to make every good loan we can. We are also educating small business owners so they can make better financial and credit decisions.”

Hoyt said he sees positive signs in the market and that conditions have improved over the last several months.

He said businesses applying for credit are generally stronger than a year ago and competition has increased between financial service providers for the most creditworthy clients.

Business owners have reported they are more optimistic about the future and expect revenues, capital spending and cash flow to improve over the next 12 months, Hoyt said.

But Hoyt also said conditions remain challenging, with the recession taking its toll on many businesses, reducing cash flow and the capacity to repay debt.

“Loan structures and terms are more conservative now than at the peak of the economic cycle – and we believe appropriately so,” Hoyt said.

Wells Fargo serves more than two million small businesses and has relationships with more than 15,000 middle-market businesses nationwide. In 2009, it provided more than $40 billion of new credit to business borrowers.

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