JPMorgan Chase (NYSE:JPM) Touting Increased Lending to Small Businesses

JPMorgan Chase (NYSE:JPM) has been marketing its success at providing loans to small businesses after given them a “second look.”

The second look theme came from Washington in hopes some of the original companies rejected in their loan applications would be offered a loan when the banks took a closer look beyond the electronic scoring system.

How it’s working at this time at JPMorgan, is if a business that has been rejected for a loan asks for a review, the bank evidently will give them a more thorough look.

So far JPMorgan claims they’ve lent out around $50 million to about 200 businesses which had formerly been rejected. It is unclear how many businesses are asking for a second look, at the bank isn’t offering any information at this time, although that is probably irrelevant, as that would be up to the business to take the first step.

In the last quarter JPMorgan originated over $700 million in new small business loans, which while looking significant, when contrasted with their overall business lending, were very small numbers. For example, in 2009, JPMorgan originated about $6 billion in small business loans, making the final quarter very anemic for lending.

For 2010, the company said their goal is to increase small business lending to $10 billion, including the use of credit card lending.

All of this sounds fine of course, but the problem reverts back to the actual condition of the economy and not just lending goals. If a business doesn’t have growth in sight, how could any bank justify lending to them just because it’s being pressured to out of duty rather than out of sound business practices?

We’re already going to see huge defaults on commercial loans throughout 2010, which are really just ramping up, so to me, banks need to be careful not to throw small business loans out there for marketing purposes like JPMorgan is, just to have a large portion blow up in their faces again.

If a small business does have real growth potential, of course it’s good business to offer them a loan which has a high probability of being paid back and helping real and sustainable private sector jobs be created.