bankers ’ speeches personal or business credit cards, slightly less than 5percent used business loans, and about 3 percent used personal loans. taken together, these survey data suggest that many small business owners do not tap the credit markets, but instead use their own wherewithal to start and fund their businesses. indeed, a bit less than 80 percent of small business owner survey respondents with fewer than 500 employees indicated that they had not even applied for business loans in the past five years. this is not to say that loans are not important – far from it – but that for a broad range of businesses, personal finances may be the determining factor in starting a business, and personal finances may also be most important in sustaining the health of a business once started. so what happened to the small business owners who did apply for loans? the turndown rate was fairly modest – about 12 percent. moreover, for those small business owners who received credit, more than 90 percent of those surveyed actually received as much credit as they had requested. these results are perhaps surprising given that two of the past five years were ones with very tight credit conditions by historical standards, and anecdotal evidence suggests that many lines of credit, for businesses and for households, were cut during the recent financial crisis. furthermore, small business lending is an important part of overall bank lending, especially at community banks. according to regulatory data, small loans to businesses, a proxy for loans to small businesses, constituted 23 percent of total business loans outstanding at commercial banks at the end of 2010. 5 over the past several years, this share has fluctuated between 22 and 27 percent of banks ’ business lending. in addition, at community banks with less than $ 1 billion in assets, the share is higher – around 66 percent – whereas at larger banks with more than $ 10 billion in assets, the share is lower – 16 percent. small business concerns the foregoing survey data on turndown rates and credit constraints for small business owners are consistent with other survey evidence collected by the national federation of independent business ( nfib ). in fact, over the past five years, small business owners identified weak demand, taxes, and government regulations more frequently than interest rates and credit conditions as their most important problem. during that period, less than 5 percent of small business respondents typically identified interest rates and credit conditions as their most important problem. in contrast, 25 percent or more of small business owners considered weak demand the most important concern during much of the past three

reuters small business lending index ( sbli ). for inclusion in this index, a loan or lease must be originated to a business borrower who has total loan outstandings across all qualifying lenders of less than $ 1 million at both the start and the end of the month in question. while some such loans and leases may be to established firms that employ more than 500 workers, small businesses are generally viewed as much more likely to borrow in these relatively small loan denominations. the lenders that provide the data used to construct the index are banks and finance companies. the year - over - year changes in the sbli are consistent with a view that loan originations are a pro - cyclical indicator ( figure 8 ). strikingly, such year - over - year changes were mainly positive, but smaller through time, until the recent business cycle peak in december 2007. during the recession, however, the year - over - year changes in the sbli were increasingly negative until the business cycle trough, which occurred in june 2009. then, shortly after the recent business cycle trough, the year - over - year negative changes in the index became smaller until they turned positive in early 2010. in february, the most recent month for which data are available, the sbli measure of business loan and lease originations rose 15 percent from a year earlier. the seasonally adjusted index, which is normalized to 100 in january 2005, provides a different take on small business originations ( figure 9 ). this measure of lending, which allows comparisons across different months, has not yet rebounded to its level in mid - 2007 even though many of the measures of small business owners ’ and bankers ’ perspectives have returned to their pre - recession levels. despite the magnitude of the rebound, there has been an apparent turnaround in loan and lease originations using the seasonally adjusted sbli measure. these data add to the evidence that credit availability to small businesses is gradually improving. while at first glance stronger demand for bank loans by large and medium - sized firms may seem irrelevant for analyzing credit to small businesses, that perception would ignore the fact thomson reuters provides some statistical tests showing that changes in the prior month's small business lending index values can predict the current month's change in the u. s. leading economic indicators index. see andrew clark and thomas ware ( 2010 ), " looking into the future with the thomson reuters / paynet small business lending index ( sbli ), " white paper ( thomson reuters,