How Does MultiFunding Grade Banks

Banking Grades is based on data gathered from quarterly FDIC call reports. Every bank regulated by the FDIC is required to submit loan data on a quarterly basis. At Banking Grades, we divide (1) the total dollar value of loans made by a bank between $100,000 and $1,000,000 by (2) the total amount of domestic deposits held by said bank. Based on our experience of helping small businesses find financing, we believe that loans of $1,000,000 or less are “small business loans”. This equation generates the Banking Grade.

As of December 31st, 2013, the “small business loans” under $100,000 averaged just $8,559.28. When we looked at the big big banks (deposit bases over $10 billion), this figure dropped to $6,530.38. This number seemed to be on par with a credit card loan and not a small business bank loan.

A call to the FDIC confirmed that credit card loans are indeed included in this figure, but no one was able to tell us exactly what portion they represent. As long as the credit card belonged to a small business, the banks were able to count these high-interest credit card balances as “small business loans.”

With this in mind, we looked at just the nation’s very biggest banks (deposits exceeding $100 billion), including household names like Bank of America, JPMorgan Chase, Wells Fargo, and Citibank. The average sub-$100,000 “small business loan” now came in under $6,110.39. Our conclusion is that small business loans under $100,000 generally don’t appear to represent loans at all, so we are now excluding them from our Banking Grades information.

MultiFunding’s Bank Report Card

Based on our analysis of the FDIC data, the average bank in America uses 7.29% of their deposits to make loans to small businesses.  Therefore, we established the following grading structure:

A (Excellent):  a bank uses 20% or more of its deposits to make small business loans.

B grade (Good): a bank uses between 10% and 20% of its deposits to make small business loans. 

C grade (Average): a bank uses between 6% and 10% of its deposits to make small business loans.

D grade (Poor): a bank uses between 3% and 6% of its deposits to make small business loans.

F grade (Failing): a bank that uses under 3% of its deposits to make small business loans. 

Caveat:  Banking Grades is based on past loan values and deposit values. It does not take into consideration the current performance of any bank, or other data provided or actions taken by the FDIC.  Therefore, we recommend that you verify the current standing of banks on this list FDIC Failed Bank List or using this FDIC Bank Search Tool.  One more thing – a good grade doesn’t mean that the bank is going to give you a loan.  It means that this is the best place for you to start.  To get a loan anywhere, the bank will consider your credit score, collateral and cash flow.

Still have questions? Contact us here.

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