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Small business has suffered at least as much as large business in the great credit crunch. Recently, however, there are signs of improvement specifically in the credit market for small business, as reported in today’s Wall Street Journal.

In the residential mortgage market (at least pre-crash), most mortgages originated by lenders were sold into the secondary market. This is what brought liquidity to the mortgage industry and enabled lenders to go out and make more loans (in retrospect, to the point of massive excess, but that isn’t the point).

By the same token, in the market for loans to small business, many of the popular SBA program 7(a) loans were also sold into the secondary market. In the year ended September 2008, 45 percent of these loans were sold on the secondary market.

The crash, naturally, dried up the market for these loans, along with all others. The percentage of originations in this program that were sold on the secondary market dropped to 24 percent in January 2009 (on a much smaller volume, as well).

Now, the GOOD news: In February, the latest month for which data are available, the percentage sold on the secondary market rose to 35 percent. Also encouraging is that the number of bids received per loan for sale has more than doubled in the past six weeks. Other metrics are also encouraging — the number of originations, the volume of loans listed on the secondary exchange, etc.

Bottom line: As the economy continues to move in fits and starts, one of the brighter spots may turn out to be small-business credit.

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