Small Business Credit Markets and Selected Policy Issues

Summary: Small businesses are owned by and employ a wide variety of entrepreneursâskilled trade technicians, medical professionals, financial consultants, technology innovators, and restaurateurs, among many others. As do large corporations, small businesses rely on credit to purchase inventory, to cover cash flow shortages that may arise from unexpected expenses or periods of inadequate income, or to expand operations. During the Great Recession of 2007-2009, lending to small businesses declined. A decade after the recession, it appears that while many small businesses enjoy increased access to credit, others might still face credit constraints.

Summary: Congress has demonstrated an ongoing interest in credit availability for small businesses, viewing them as a medium for stimulating the economy and creating jobs. In general, Congress's interest in the small business credit market focuses on quantity and priceâspecifically (1) whether small businesses can reasonably obtain loans from private lenders and (2) whether the prices (lending rates and fees) of such credit are fair and competitive. Congress passed legislation to facilitate lending to small businesses that are likely to face hurdles in obtaining credit:

Summary: The Small Business Act of 1953 (P.L. 83-163) established the Small Business Administration (SBA), which administers several types of programs to support capital access for small businesses that struggle to obtain credit on reasonable terms and conditions from private-sector lenders. The Community Reinvestment Act (CRA; P.L. 95-128 ) encouraged banks to address persistent unmet small business credit demands in low- and moderate-income (LMI) communities. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203 ) required the Bureau of Consumer Financial Protection (CFPB) to collect data from small business lenders concerning credit applications made by women-owned, minority-owned, and small businesses with the goal of better understanding their financing needs. The CFPB has not yet implemented this requirement.

Summary: Data that capture small business borrowers' characteristics and lenders' underwriting processes (i.e., their processes for determining whether borrowers are creditworthy) could help to accurately determine whether small businesses have sufficient and fairly priced access to private credit. Various government agencies and financial institutions define small business using factors that may be based upon annual revenues, number of employees, market scope, market share, and some or all of the above factors. Because no consensus definition of a small business exists, data to analyze the small business credit market's performance are limited and fragmented. Moreover, certain small businesses face additional challenges that may force them to seek financing outside of traditional business credit markets. Many new start-up firms, for example, do not have the financial track records to qualify for standard business loans and frequently must rely on mortgage and consumer credit. In addition, many small businesses rely on customized lending products, thus limiting their choice of lenders to those with specialized underwriting methodologies or business models. The lack of a consensus definition of small business, along with the wide variety of idiosyncratic business risks, hinders the availability of conclusive evidence on the small business credit market's overall performance and, therefore, the ability to assess the effectiveness of various policy actions designed to increase small business lending.

Summary: In 2017, the CFPB issued a request for information on the small business lending market to solicit feedback on how to implement the Dodd-Frank requirement to collect data from financial institutions on small business credit applications. Final rulemaking, however, has been delayed. In addition, various bills regarding the small business credit market have been introduced in the 116 th Congress. For example, H.Res. 370 would express "the sense of the House of Representatives that small business owners seeking financing have fundamental rights, including transparent pricing and terms, competitive products, responsible underwriting, fair treatment from financing providers, brokers, and lead generators, inclusive credit access, and fair collection practices." H.R. 3374 would amend the Equal Credit Opportunity Act to require the collection of small business loan data related to LGBTQ-owned businesses. H.R. 1937 and S. 212 , the Indian Community Economic Enhancement Act of 2019, among other things, would require the Government Accountability Office to conduct a study to assess and quantify the extent to which federal loan guarantees, such as those provided by the SBA, have been used to facilitate credit access in these communities.

Small businesses are owned by and employ a wide variety of entrepreneursâskilled trade technicians, medical professionals, financial consultants, technology innovators, and restaurateurs, among many others. As do large corporations, small businesses rely on loans to purchase inventory, to cover cash flow shortages that may arise from unexpected expenses or periods of inadequate income, or to expand operations. The Federal Reserve has reported that lending to small businesses declined during the Great Recession of 2007-2009. During the recession, many firms scaled down operations in anticipation of fewer sales, and lenders also tightened lending standards. A decade after the recession, evidence on whether lending to small business has increased is arguably inconclusive. Some small firms may be able to access the credit they need; however, others may still face credit constraints, and still others may be discouraged from applying for credit. Furthermore, drawing direct conclusions about small business access to credit can be difficult because available data are limited and fragmented.

Congress has demonstrated an ongoing interest in small business loans (SBLs), viewing small businesses as a medium for stimulating the economy and creating jobs. Congress's interest in small business credit access generally focuses on (1) whether small businesses can secure credit from private lenders and (2) whether small businesses can obtain such credit at fair and competitive lending rates. In other words, policymakers are interested in whether market failures exist that impede small business access to credit and, if so, what policy interventions might be warranted to address those failures. Market failures, in economics and specifically in the SBL market context, refer to barriers that impede credit allocation by private lenders. For example, some lenders may be reluctant to lend to businesses with collateral assets (e.g., inventories) that are difficult to liquidate, as may be typical of some small businesses (e.g., restaurants). Under certain financial or regulatory circumstances, small loans may not generate sufficient returns to justify their origination costs, which also may be considered a market failure. In addition, market failures may exist when borrowers pay noncompetitive lending rates in excess of their default risk. Start-ups and some small businesses that provide niche products frequently must rely on mortgage or consumer credit or private equity investors rather than more traditional SBLs because lenders find it challenging to price loans for these firms, which could be another indicator of SBL market failure.

Obtaining conclusive evidence on SBL market performance in terms of quantities and pricing is difficult for several reasons. First, there is no consensus definition of a small business across government and industry. Moreover, as the Federal Reserve stated, "fully comprehensive data that directly measure the financing activities of small businesses do not exist." Drawing conclusions about the availability and costs of SBLs is not possible using existing data sources, which lack information such as the size and financial characteristics of the businesses that apply for credit, the types of loan products they seek, the types of lenders to whom they applied for credit, and which credit requests were rejected and which were approved. Second, the risks small business owners take are not standardized and vary extensively across industries and locations. For this reason, determining whether SBL prices (lending rates and fees) are competitive is difficult without standardized benchmark prices that can be used to compare the relative prices of other SBLs.

To address SBL market failures, Congress passed legislation to facilitate lending to small businesses that are likely to face hurdles obtaining credit. For example, the Small Business Act of 1953 (P.L. 83-163) established the Small Business Administration (SBA), which administers several types of programs to support capital access for small businesses that can demonstrate the inability to obtain credit at reasonable terms and conditions from private-sector lenders. The Community Reinvestment Act (CRA; P.L. 95-128 ) encouraged banks to address persistent unmet small business credit demands in low- and moderate-income (LMI) communities. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203 ) required the Bureau of Consumer Financial Protection (CFPB) to collect data from small business lenders to identify the financing needs of small businesses, especially those owned by women and minorities. (The CFPB has not yet implemented this requirement.)

In addition, various bills addressing the SBL market have been introduced in the 116 th Congress. For example, H.Res. 370 would express "the sense of the House of Representatives that small business owners seeking financing have fundamental rights, including transparent pricing and terms, competitive products, responsible underwriting, fair treatment from financing providers, brokers, and lead generators, inclusive credit access, and fair collection practices." H.R. 3374 would amend the Equal Credit Opportunity Act to require the collection of small business loan data related to LGBTQ-owned businesses. H.R. 1937 and S. 212 , the Indian Community Economic Enhancement Act of 2019, among other things, would require the Government Accountability Office to assess and quantify the extent to which federal loan guarantees, such as those provided by the SBA, have been used to facilitate credit access in these communities.

This report examines th e difficulty of assessing and quantifying market failures in the SBL market, which consists of small business borrowers (demanders) and lenders (suppliers). It begins by reviewing various ways to define a small business, illustrating that there is no consensus definition of the demand side of the SBL market across government or industry. The focus then shifts to describing the supply sideânamely the types of lenders that lend to small businesses, as well as their lending business models and practices. The report subsequently attempts to identify credit shortages in certain SBL market segments (e.g., the market for small loans, loans for businesses with risky or unsuitable collateral, and loans for businesses in underserved communities). It also examines whether market failures associated with SBL pricing can be identified. Finally, the report concludes by briefly discussing the Dodd-Frank Act requirement that the CFPB collect data to facilitate the understanding of SBL market activity.

The Demand for SBLs: Multiple Definitions of a Small Business

There is no universally accepted definition of a small business. The federal government and industry define small businesses differently in different circumstances. Although factors such as annual earnings, number of employees, type of business, and market share are typically considered, determining the universe of small businesses from which to collect data is difficult without a consensus definition. If a consensus definition existed, then identifying a small business for data-collection purposes would become more feasibleâfor example, a concise question on a loan application might identify whether the business applying for the loan met certain defined factors making it a small business. Below are examples of the ways regulators, researchers, Congress, and industry have defined small businesses:

The SBA defines a small business primarily by using a size standards table it compiles and updates periodically. The table lists size thresholds for various industries by either average annual receipts or number of employees. The SBA also defines small businesses differently for different SBA programs. For example, the SBA's 7(a), Certified Development Company/504, and Small Business Investment Company (SBIC) programs have alternative size standards based on tangible net worth and average net income. Academic research frequently uses a firm that has 500 employees or fewer (but does not monopolize an industry) as a proxy measure for a small business. This definition has been adopted by various federal agencies, such as the U.S. Census Bureau, the Bureau of Labor Statistics, and the Federal Reserve. In addition, some research views microbusinesses as a subset of small businesses. A common academic definition of a microbusiness is a firm with only one owner, five employees or fewer, and annual sales and assets under $250,000. Small business definitions in statute also vary. For example, the Internal Revenue Service (IRS) sets different size standards for small businesses under various tax laws. The IRS provides certain tax forms for self-employed taxpayers and small businesses with assets under $10 million. The Patient Protection and Affordable Care Act of 2010 (ACA; P.L. 111-148 ), however, defined a small business in multiple ways (e.g., fewer than 50 full-time employees to avoid ACA's employer shared responsibility provision; fewer than 25 full-time equivalent employees for tax credits, etc.). According to a Federal Deposit Insurance Corporation (FDIC) survey, small and large banks have their own definitions of a small business. Small banks (defined as banks with $10 billion or less in assets) view a small business as one in which the owner "wears many hats," referring to an owner who performs multiple tasks, perhaps because the firm is a start-up or still in its early growth stage. Large banks define small businesses more formally, in terms of annual revenues and sales.

The Supply of SBLs: Background on Lenders and Industry Underwriting and Funding Practices

This section provides background on small business lenders and underwriting practices. Although small businesses rely on a variety of credit sources that include personal (consumer or mortgage) credit, family, friends, and crowd-funding, they also rely on various types of financial institutions (banks and nonbanks). Financial institutions vary in how they are regulated, the business models they adopt, the types of loans they offer, and the growth stages of the small businesses they serve. These differences are all factors involved when evaluating whether shortages exist in the SBL market.

Some lenders are increasingly using business credit scores to assess creditworthiness, and they may deny SBLs due to either a lack of or poor business credit history. The SBA since 2014 has also relied upon credit scores to qualify applicants for its 7(a) loan program. In 2016, the Small Business American Dream Gap Report found that many businesses failed to understand their business scores or even know that they had one. The text box below summarizes the information used to compute credit scores specifically for businesses.

Because banks have historically been the principal sources for commercial business lending, credit availability is frequently evaluated in terms of banking trends; however, nonbank financial institutions also engage in commercial business and industrial (C&I) lending. The Federal Reserve has reported that smaller firms are more likely than large firms to apply to nonbank lenders for credit. Credit unions have become an important source of small business loans in recent years. Likewise, nonbank fintech lenders have become an important source of credit in market segments that banks may have exited (e.g., business loans of $100,000 or less).

Because the types of SBLs made by a bank may be related to its size, this section begins with bank size definitions. Small community banks , which may be defined as having total assets of $1 billion or less, are considered a subset of the larger category of community banks; c ommunity banks may be defined as having total assets up to $10 billion. Large banks have total assets that exceed $10 billion.

Community banks hold approximately 50% of outstanding SBLs (defined as the share of loans with principal amounts less than $100,000); however, the number and market share of community banks have been declining for more than a decade. Overall, the number of FDIC-insured institutions fell from a peak of 18,083 in 1986 to 5,477 in 2018. The number of institutions with less than $1 billion in assets fell from 17,514 to 4,704 during that time period, and the share of industry assets held by those banks fell from 37% to 7%. Meanwhile, the number of banks with more than $10 billion in assets rose from 38 to 138, and the share of total banking industry assets held by those banks increased from 28% to 84%. 87 The decline in community banks is meaningful because they have historically been one of the largest sources of funding for small businesses. Furthermore, some academic research suggests that, as banks grow, their enthusiasm for lending to starts-ups and small businesses may diminish. In 2015, the Federal Reserve highlighted a decline in the share of community banks' business loan portfolios with initial principal amounts under $100,000, suggesting that these banks were making fewer loans to small businesses.

Credit Union Lending to Small Business Members

Although some credit unions make SBLs, their commercial lending activities are limited. The Credit Union Membership Access Act of 1998 (CUMAA; P.L. 105-219 ) codified the definition of a credit union member business loan (MBL) and established a commercial lending cap, among other provisions. An MBL is any loan, line of credit, or letter of credit used for an agricultural purpose or for a commercial, corporate, or other business investment property or venture. The CUMAA limited (for one member or group of associated members) the aggregate amount of outstanding business loans to a maximum of 15% of the credit union's net worth or $100,000, whichever is greater. The CUMAA also limited the aggregate amount of MBLs made by a single credit union to the lesser of 1.75 times the credit union's actual net worth or 1.75 times the minimum net worth required to be well-capitalized. Three exceptions to the credit union aggregate MBL limit were authorized for (1) credit unions that have low-income designations or participate in the Community Development Financial Institutions program; (2) credit unions chartered for making business loans; and (3) credit unions with a history of primarily making such loans.

Generally speaking, the volume of credit union MBL lending is minor in comparison to the banking system. As of September 30, 2015, for example, credit unions reportedly accounted for approximately 1.4% of the commercial lending done by the banking system. A large credit unionâone with $10 million or more in assetsâmight adopt a business lending model comparable to a small community bank or perhaps a midsize regional bank in the commercial loan market. Similar to community banks, approximately 85% of MBLs were secured by real estate in 2013, with some credit unions heavily concentrated in agricultural loans. A larger credit union (e.g., $1 billion or more in assets) could originate larger loans relative to most community banks with assets less than $1 billion. Despite competition with some banks in certain localities, the credit union system is significantly smaller than the banking system in terms of overall asset holdings and, correspondingly, has a smaller footprint in the broader commercial lending market.

The share of SBLs originated by nonbank fintech lenders has expanded. However, whether the increase in originations reflects an increase in small business lending is unclear because not all fintechs retain their loan originations in their asset portfolios. Fintechs may generate revenues by (1) originating loans and collecting underwriting fees; (2) selling the loans to third-party investors (via adoption of a private placement funding model, discussed in the below text box "Funding Options for Lenders"); and (3) collecting loan servicing fees (from either the borrowers or investors). The fintech lending model has attained a competitive edge by streamlining and expediting the more traditional labor- and paper-intensive manual underwriting process by, for example, adopting online application submission and proprietary artificial intelligence for underwriting. For this reason, marketplace lending has been both a substitute (providing credit in some loan markets not served by banks) and a complement (via numerous bank partnerships) to the banking system. If, for example, a fintech partners with a bank and subsequently transfers (sells) its loan originations to a bank's balance sheet, the loan would be reported as a banking asset; such scenarios make it difficult to isolate fintech firms' impact in the broader SBL market.

Access to Funding in Different Growth Stages

This section explains the relationship between the growth stage of a small business and its access to credit. Start-ups and more established firms are likely to have different experiences obtaining business loans. In addition, underwriting requirements and the degree of loan product customization, which vary among lenders, may also be more suitable for borrowers at different stages. The text box at the end of this section summarizes some funding options for lenders that may also influence their underwriting practices and the types of loans they offer.

A firm's growth stage matters for credit access. During the initial start-up stage, small businesses typically have little collateral; their financial statements often lack sufficient histories of earnings and tax returns to meet lender requirements; and they typically do not have a performance track record during an economic downturn. As a result, lenders often find it difficult, time-consuming, and costly to determine whether a start-up is creditworthy. For this reason, start-ups often obtain funds from friends and family and drawdowns of personal savings. In addition, start-ups rely on financing from the owner's personal consumer credit products (e.g., credit cards, home equity loans) rather than a traditional commercial loan made by a financial institution. According to the Federal Reserve Small Business Credit Survey, which defines a small business as having $1 million or less in annual revenue, 42% of the small business owners surveyed used their personal credit scores to secure a loan and 45% used both their business and personal credit scores. Furthermore, having a low business credit score was reported as the number one reason why small businesses were rejected for credit, followed by an insufficient credit history.

Because many small businesses rely on personal credit history and consumer credit products (rather than business credit), declines in consumer credit availability during economic downturns are also likely to affect small businesses' access to credit. Home equity credit during the 2007-2009 recession declined along with real estate collateral prices, contributing to tighter lending standards. Likewise, any consumer credit cost increase is likely to affect certain small businesses. For example, given the rise in credit card rates over the recession, small businesses that carried large debt balances over several payment cycles might have paid higher borrowing costs relative to a more conventional business loan. Hence, changes in the availability and pricing of consumer credit are likely to have similar effects on consumers and some small businesses, especially start-ups.

Once a firm enters into a more advanced growth stage, it may have one or more of the following attributes:

a positive cash flow, more than two years of experience, a high business credit score, or achieves $1 million or more in annual revenues.

Lenders can subsequently provide more mature businesses with one or more loans secured by their assets, supported by their credit and earnings histories. Accordingly, firms in later growth stages tend to have greater access to SBLs. Nevertheless, small firms still are more likely to obtain credit via relationship lending .

Two prevailing commercial lending underwriting models are relationship and transactional lending . Small and community banks typically engage in relationship lending (or relationship banking), meaning that they develop close familiarity with their customers (i.e., soft information) and provide financial services within a circumscribed geographical area. Relationship lending provides a comparative advantage for pricing lending risks that are unique, infrequent, and localized. A relationship lender may also prefer being in close geographical proximity to the collateral (e.g., local real estate) borrowers used to secure their loans. The nature of the risks requires the loan underwriting process to be more labor-intensive.

By contrast, large institutions typically engage in transactional lending that frequently relies on automated, statistical underwriting methodologies and large volumes. Transactional lending provides a comparative advantage for loan pricing when the borrowers face more conventional business risks (i.e., hard information, such as sales fluctuations, costs of inputs, specific industry factors, and other relevant metrics) rather than idiosyncratic risks that are difficult for an automated underwriting model to quantify. By relying on conventional financial metrics and documentation, transactional lenders do not need to be located near their borrowers to monitor their financial health. Moreover, because underwriting is more automated for these institutions, credit requests are most frequently denied because of (1) weak business performance, (2) insufficient loan collateral, and (3) having too much existing debt outstanding.

A lender's underwriting model influences the way it defines a small business. As previously mentioned, community banks tend to describe small businesses as those whose owners multitask, meaning that they perform multiple large-scale tasks rather than relying on designated, full-time employees. Small businesses who face these types of challenges are unlikely to provide (in a timely manner) the metrics necessary for automated underwriting and, therefore, tend to be underwritten manually when requesting credit. For manual underwriting, small firms' credit scores are often not essential to evaluate creditworthiness and determine loan terms. Instead, relationship lending allows for more tailoring of loans (e.g., customized lending terms or repayment schedules) to small firms' idiosyncratic needs. Hence, lenders with relationship lending models are likely more well-adapted to underwrite businesses with risks that are unusual and oftentimes difficult to quantify.

By contrast, large banks use metrics such as the dollar amount of annual sales revenues to categorize a small business. Automated underwriting becomes more amenable for businesses with business credit scores and the ability to provide financial documentation in a timely manner. A bank may offer an unsecured credit card loan to a firm with reliable financial performance records, thus reducing the monitoring costs associated with collateralized lending. Furthermore, firms with standardized financials can obtain more standardized (noncustomized) and competitively priced loans, which can be delivered faster. In general, the average costs to originate (and fund) loans decrease as the volume of loans or loan amounts increase. Lenders with transactional lending models can benefit more (relative to manual underwriters) from such economies of scale because their customer bases include more borrowers with standardized and quantifiable risks.

Although they tend to rely on different types of credit, both start-ups and well-established firms may be highly dependent on certain lenders that specialize in underwriting loans for certain industries (e.g., maritime, breweries and distilleries, or moving). In addition, some lenders primarily engaged in transactional underwriting may still rely on relationship lending under some limited circumstances. For example, a larger firm may be willing to relax supplementary financial requirements (known as covenants) designed to reduce credit risk for borrowers with whom the firm has an ongoing relationship. This type of action may be considered a form of manual underwriting.

Attempting to Identify SBL Market Failures

This section attempts to find evidence of market failures that may be addressed by policy interventions. The specific areas of potential concern are (1) whether the lending industry is providing enough small loans for small businesses; (2) whether certain small businesses lack the type of collateral that lenders require to secure the loans; (3) whether the amount of credit provided in low- and moderate-income (LMI) communities is insufficient; and (4) whether the price of credit is too expensive for small businesses.

Reviewing the number of small-sized loans may help determine if a SBL market shortage exists, assuming that (1) lenders make small-sized loans to small businesses and (2) an ideal size definition exists. The FDIC provides multiple size definitions of SBLs:

loans with origination amounts less than or equal to $100,000; loans with origination amounts less than or equal to $250,000; loans to firms with gross annual revenues less than or equal to $1 million; and loans with origination amounts greater than $250,000 to firms satisfying any amenable small business definition.

The FDIC's 2018 Small Business Lending Survey of 1,200 banks uses a C&I loan size limit of $1 million as a proxy for small business lending.

In 2015, the Federal Reserve specifically highlighted the decline of community banks' business loans with initial principal amounts under $100,000. The current interest-rate environment, which has been at a historic low since the recent recession, may influence this outcome. In a low-interest-rate environment, even relationship lenders may have a greater incentive to increase loan sizes to generate sufficient interest income to cover the costs of providing them. Assuming that the underwriting, servicing, and compliance costs do not vary with loan size, then incurring those fixed costs for larger-sized loans, which may be more likely to generate more interest revenue, may be more economical for lenders. The retreat from the $100,000 loan market might be temporary if interest rates rise in the future. Nonetheless, denials of SBL requests because of a shift in lenders' preferences toward originating larger loans may indicate a market failure.

Attempting to find a proxy for market failure by examining the availability of SBLs of $100,000 or any size threshold is challenging for the following reasons:

According to the Federal Reserve's Survey of Lending Terms , at the beginning of 2017, the average C&I loan size for all domestic commercial banks (excluding U.S. branches and agencies of foreign banks) was approximately $575,000; the average business loan size at small domestic banks was approximately $123,000; and the average loan size at large domestic banks was approximately $729,000. By contrast, at the beginning of 2007 (prior to the 2007-2009 recession), the average C&I loan size for all domestic commercial banks was approximately $379,000; the average business loan size at small domestic banks was approximately $117,000; and the average loan size at large domestic banks was approximately $578,000. Despite the 51.7% increase in average C&I loan size for all domestic commercial banks, the average C&I loan size for small commercial banksâwhich hold approximately 50% of outstanding SBLsâincreased by a relatively modest 5.13%. Thus, it is not apparent that the smaller-size SBL market segment has been displaced. If lenders increase the total amount of SBLs made at $250,000 or $1 million, for example, while simultaneously making fewer loans of $100,000, then whether that outcome represents an increase or decrease in overall small business lending is subject to debate. Similarly, the FDIC noted that even the $1 million loan size limit may underestimate the amount of loans made to small firms. Some small firms (with annual revenues under $1 million) may get loans that exceed $1 million. Some SBLs may be secured by residential real estate and counted as mortgages. Conversely, the data collected may overstate SBLs to small businesses. The financial data on bank C&I loans do not report on loans made to a well-defined group of small firms. Instead, the data only report on small loans to all businesses (regardless of size), thus overstating the amount of SBLs, given that large businesses also receive loans of these sizes. The demand for $100,000 SBLs (from community banks) may have decreased. For example, technology firms, which represent many start-ups since the 2007-2009 recession, frequently do not purchase large amounts of inventory. Such firms that are able to operate out of the owners' homes may finance operations with personal savings and credit cards. Conversely, the demand for large loans may have increased . For example, some firms may determine that obtaining larger-size loans during the current low-interest-rate environment is more economical than having to reborrow at some point in the future at higher lending rates.

In addition to the abovementioned issues, drawing conclusions about SBL shortages based primarily on the lending practices of community banks is premature in the absence of a comprehensive dataset that includes loans made by nonbank lenders. Fintech lenders may be filling the gap in small business lending left by a decline in community banks. Because fintech lenders generally are not required to hold capital against their portfolio loans or can fund via private placement, they may be able to take advantage of opportunities to lend to small businesses that would not generate sufficient profit margins for community banks. Loans retained in fintech lenders' portfolios or funded via private placement, however, are currently not reported to the federal banking regulators. Furthermore, businesses may have multiple loans and often seek credit from multiple lenders. In some cases, small businesses may be able to obtain credit from some lenders and not others, particularly in cases when borrowers inadvertently seek credit from lenders using incompatible underwriting models. In short, the focus on a particular loan size or particular lender type is arguably too narrow for evaluating performance in the SBL market.

Collateral Eligibility for Secured Lending

A market failure may exist if lenders are unwilling to provide loans backed by illiquid collateral (i.e., collateral that cannot be easily liquidated if the borrower fails to repay the loan)âan issue that may disproportionately affect certain small businesses. Banks and credit unions provide business loans via asset-based lending (ABL) guidelines that require firms to pledge assets (e.g., cash, receivables from inventory sales, inventory) as collateral for loans. For ABL purposes, federal banking regulators define a SBL as any loan to a small business (as defined by Section 3(a) of the Small Business Act of 1953 [P.L. 83-163 as amended] and implemented by the SBA) or a loan that does not exceed $2 million for commercial, corporate, business, or agricultural purposes. A bank typically provides fully collateralized short-term loans (under five years) to firms based upon their performance records (e.g., sufficient credit and earnings histories and assets), and it monitors the risks to the collateral that would need to be liquidated (sold) if the small business experienced financial distress. Similarly, credit unions can provide MBLs that comply with NCUA's ABL guidelines.

Some firms' inventory, however, may not be ideal for ABL guidelines. Collateral that would be difficult to liquidate without losing too much value may not be acceptable. For example, restaurants (a common type of small business) have leases, cooking equipment (likely to resell for less than its initial sale price), and inventories of food that would not generate the income necessary to recoup losses from a loan default. Restaurants also have difficulty demonstrating the ability to repay a loan over a period of years. For this reason, lenders may not accept a restaurant's collateral as security for a loan.

In response to this market failure, the SBA administers various programs to facilitate small business credit access (typically loans for up to $5 million and for 5-25 years) for financially healthy firms with collateral or inventory less likely to satisfy ABL requirements. Some borrowers that can demonstrate the ability to repay (e.g., minimum business credit score, management experience, minimum levels of cash flow, some collateral, and personal guarantees by the business owners) still may not be able to obtain affordable credit elsewhere (i.e., from other lenders), which might seem paradoxical. This may be because the firm's inventory does not turn over at a steady pace (e.g., seasonal merchandise), and a lender would face difficulty quickly liquidating the collateral if the firm became financially distressed. For a fee, the SBA may retain the credit risk of a small business loan up to a certain percentage, and the lender assumes the remaining share of credit risk to ensure incentive alignment during underwriting. SBA-guaranteed loans frequently have higher lending rates relative to ABL loans, taking into account the guarantee (and loan servicing) fees charged to borrowers to compensate the federal agency for retaining a majority of the default risk and the additional risk correlated with illiquid collateral.

Following the recent recession, the SBA has reported an increase in the dollar amount of guaranteed lending over 2013-2018, which might indicate the ability to mitigate more market failures. If, however, borrowers fail to repay their loans and it is not possible to recover sufficient fees and proceeds from asset liquidations to cover the losses, then the SBA may need additional appropriations from Congress to account for the shortfall. The utility of government intervention in the form of SBA-guaranteed lending, therefore, is debatable. When borrowers are unable to obtain private-sector credit but subsequently repay their SBA loans, that outcome may suggest that a government guarantee helped correct a failure and improve SBL market performance. Conversely, when borrowers are unable to obtain private-sector credit and subsequently default on their SBA loans, that outcome suggests no market failure initially existed in the private SBL market. Monitoring loan performance is useful in distinguishing between a legitimate credit market barrier and an excessive lending risk, but such monitoring can only occur after loans have been originated and guaranteed, which underscores the difficulty of correctly identifying and effectively mitigating market failures.

A market failure may exist if lenders make fewer SBLs in low- and moderate-income (LMI) areas than in higher-income areas. The Community Reinvestment Act of 1977 (CRA; P.L. 95-128 ) was designed to encourage banking institutions to meet the credit needs of their entire communities. The federal banking regulatory agenciesâthe Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currencyâcurrently implement the CRA. The regulators issue CRA credits, or points, when banks engage in qualifying activitiesâsuch as mortgage, consumer, and business lending; community investments; and low-cost services that would benefit LMI areas and entitiesâthat occur within a designated assessment area. These credits are then used to issue each bank a performance rating. The CRA requires these ratings be considered when banks apply for charters, branches, mergers, and acquisitions, among other things.

Under the CRA, the banking regulators award CRA credit to certain SBLs (including small farm loans), provided these loans meet both (1) a size test and (2) a purpose test. Small businesses that receive an SBL must either (1) meet the size eligibility standards for the SBA's Certified Development Company/504 or SBIC programs or (2) have gross annual revenues of $1 million or less to qualify for CRA credit. The loans must also promote community and economic development, as explained in the federal bank regulators' guidelines, to qualify for CRA credit.

Figure 1 shows the distribution of SBLs for $1 million or less that were eligible for CRA credit over the 2009-2017 period across census tracts grouped into four relative income categories as measured against median family income (MFI). For comparison, the last column shows the median percentages of total SBLs over the entire period. The median figures are as follows: 5.2% in the low-income tracts (< 50% of MFI), 16.7% in the moderate-income tracts (50% â¥ MFI < 80%), 40% in the middle-income tracts (80% â¥ MFI <120%), and 37.9% in the upper-income tracts (120% â¥ of MFI). This figure does not capture all CRA business lending because SBLs exceeding $1 million may also receive CRA credit. (In addition, the data in this figure represent a subset of lending activity that occurs in LMI tracts because large C&I loans, as well as consumer loans, may qualify for CRA credit.) Furthermore, changes in the number of SBL or CRA loans could indicate a change in the percentage of CRA credit awarded to SBLs, a change in total SBL originations, or both.

Despite data limitations, the trends suggest that the share of SBLs in LMI areas has remained steady at approximately 20% for almost a decade. Whether that share can increase furtherâwhich would suggest that credit may not be accessible for small businesses located in LMI areasâis difficult to determine. For example, the demand for small business credit in LMI areas may be lower relative to higher-income areas. The number of potential businesses and lending opportunities in LMI areas may be comparatively lower if a greater percentage of small businesses locate in areas where their prospective customers would have sufficient incomes to sustain demand for the products or services they offer. In short, the data on SBLs awarded CRA credit do not provide a way to measure the demand for SBLs. There is no information on the number of businesses located in LMI areas that applied for loans and were subsequently rejected, making it difficult to conclude that a failure exists in the SBL market in LMI areas. Accordingly, Congress has called for the collection of data from small business lenders, discussed in more detail in the section entitled " CFPB Collection of Small Business Data ."

The pricing of SBLsâspecifically interest rates and feesâis another consideration for evaluating the small business credit market's overall performance. A small business might not seek credit if it is too expensive. A small business might determine that it cannot afford an offer for credit if more of its financial resources (e.g., net income) must be devoted to paying interest than reinvesting in operations. When loan prices are set substantially higher than the risks posed by borrowers and the costs to acquire the funds used to make the loans, the pricing is not considered competitive. In economics, a competitive price is one that multiple suppliers would offer to buyers for the same good or service. A competitive price is often the best or lowest that a buyer can find for a good or service and, therefore, can be used as a benchmark price when comparison shopping to evaluate other offers.

Determining whether SBLs are competitively priced is challenging. A common market failure is imperfect information, or information asymmetry âwhen one party in a transaction has more accurate or more detailed information than the other party. This imbalance can result in inefficient outcomes. In the case of the small business credit market, the risks taken by small business owners are not standardized and vary extensively across industries and geographical locations. It is difficult for lenders to determine competitive loan pricing without sufficient comparable businesses from which to obtain reasonable estimates of expected losses and predict cash flows. Similarly, it may be difficult for small businesses to determine whether a loan offer is competitive without sufficient comparable business loans.

Relationship lending, as previously discussed, can alleviate an SBL market failure that arises from the inability to price credit risks. Relationship lending allows a lender to collect more information about a borrower's financial behaviors, which may result in less stringent collateral requirements and greater access to credit at a lower price over time.

Disclosure laws are another way to potentially resolve this type of market failure. In consumer credit markets, the Truth-In-Lending Act of 1968 (TILA; P.L. 90-301) requires lenders to disclose the total cost of credit to consumers in the form of an annual percentage rate (APR). TILA is designed to ensure borrowers are aware of their loan costs. For some consumer products, regulators require lenders to provide greater disclosures about product features that could result in borrowers paying excessive rates and fees, especially in cases where they are unaware of assessed penalty fees and interest-rate increases. Effective disclosures arguably mitigate the incentive for lenders to charge substantial markups above funding costs and borrowers' risks, thus resulting in lower loan prices.

Although TILA applies to mortgage and consumer loans, it does not apply to business loans. For this reason, legislative proposals have been introduced in Congress to extend TILA disclosures to small firms. For example, H.R. 5660 , the Small Business Credit Card Act of 2018, would extend TILA disclosures to firms with 50 or fewer employees. Whether TILA protections for business credit would result in more competitive business loan terms is unclear. First, evidence suggests that TILA protections do not necessarily encourage consumers to shop for lower borrowing rates despite having more standardized (e.g., collateral) lending risks relative to businesses, suggesting it is unlikely TILA protections for small business would encourage them to shop around for credit. Second, some small businesses may already rely on certain types of credit to which TILA does apply. For example, some businesses obtain credit via personal credit cards and home equity loans, to which TILA disclosure requirements already apply. In addition, many lenders already disclose APRs on their business credit cards.

The Dodd-Frank Act requires financial institutions to compile, maintain, and report information concerning credit applications made by women-owned, minority-owned, and small businesses. This data collection is intended to "facilitate enforcement of fair lending laws" and to "enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses." The Dodd-Frank Act authorizes the CFPB to collect various data from financial institutions about the credit applications they receive from small businesses, including the number of the application and date it was received; the type and purpose of loan or credit applied for; the amount of credit applied for and approved; the type of action taken with regard to each application and the date of such action; the census tract of the principal place of business; the business's gross annual revenue; and the race, sex, and ethnicity of the business's principal owners.

On May 10, 2017, the CFPB announced that it was seeking public comment about the small business financing market, including relevant business lending data used and maintained by financial institutions and the costs associated with the collection and reporting of data. Specifically, the CFPB requested information on five categories: "(1) small business definition, (2) data points, (3) financial institutions engaged in business lending, (4) access to credit and financial products offered to businesses, and (5) privacy." With respect to definition, the CFPB sought comment on the best definition of a small business and the burden of collecting data under that definition. In addition, the CFPB requested information on what data financial institutions should be required to collect and report, and which institutions should be exempted. The CFPB also requested feedback on product types offered to small businesses because the variety of terms and loan covenants that can be used to tailor loans, in addition to the interest rate, are part of the overall cost (price) of credit. The comment period closed on September 14, 2017. The CFPB has not yet issued a proposed rule, but it recently announced that such a rule was part of its spring 2019 regulatory agenda.

Evaluating the small business lending market's overall performance (in terms of market failures) would be easier with less fragmented, more complete data. Collecting data, however, poses challenges for the CFPB and industry lenders. First, the Equal Credit Opportunity Act prohibits the collection of race and gender information, thus increasing the difficulty for the CFPB to implement a rule that would require such reporting. In addition, the collection and reporting of SBL data would likely need to be converted to a digital format. The fixed costs to implement digital reporting systems could be relatively larger for small financial institutions than for large institutions. Large institutions have more customers (to justify the initial expense) and offer a more limited range of standardized products. Depending upon the collection requirements eventually implemented, some institutions might decide to offer more standardized, less tailored financial products to reduce reporting costs. It is possible that more financial institutions may require minimum loan amounts (e.g., exit the loan market delineated as $100,000 and below) to ensure that the loans generate enough revenue to cover the costs to fund and report data.

From an economics viewpoint, the ability to evaluate the performance of various SBL market segmentsâspecifically whether (1) a small business credit shortage exists or (2) pricing for loans to small businesses is significantly above the lending risks and funding costsâis extremely challenging. Policymakers have been interested in whether market failures that impede small business access to capital exist and, if so, what policy interventions might address those market failures. However, it is difficult to discern which policy interventions would be most well-suited to addressing potential small business credit market failures without better data about the market itself. Arriving at more definitive conclusions about the availability and costs of SBLs might be possible with information such as the size and financial characteristics of the businesses that apply for loans, the types of loan products they request, the type of lenders to whom they applied, and which applications were approved and rejected. Collecting the necessary data, however, presents both legal and cost challenges.


The Outdoor Recreation Economy

Summary: Congress plays an overarching role in shaping outdoor recreation throughout the nation through legislation and oversight. As Congress continues to debate outdoor recreation issuesâincluding provision of federal resources, planning efforts, and fundingâdata on the size, distribution, and relative importance of the outdoor recreation economy may inform these debates. Both historical and recent legislative and executive efforts centered on outdoor recreation have identified the economic importance of outdoor recreation. In 2016, Congress passed the Outdoor Recreation Jobs and Economic Impact Act ( P.L. 114-249 ), which directed the Bureau of Economic Analysis (BEA) in the Department of Commerce to create an account that would measure the outdoor recreation economy. BEA released the first official Outdoor Recreation Satellite Account (ORSA) statistics in September 2018 and updated them in September 2019.

Summary: According to the ORSA statistics, in 2017, the current-dollar value added of the outdoor recreation economy was $427Â billion, or 2.2% of gross domestic product (GDP). ORSA statistics show that supporting activities, such as construction and travel and tourism expenses, accounted for approximately half of value added. Conventional outdoor recreation activities, as defined by BEA, accounted for another 30.7% of real outdoor recreation gross output; o ther recreation accounted for 19.3%. The outdoor recreation economy grew by 3.9% in 2017, faster than the 2.4% growth for the overall U.S. economy, and has grown approximately 9.9% since 2012. Real gross output, real compensation, and real employment all grew faster in the outdoor recreation economy than in the overall economy in 2016. BEA reports that the "arts, entertainment, recreation, accommodation, and food services industry" was the largest contributor to the outdoor recreation economy in 2017, accounting for $112.9 billion of current-dollar outdoor recreation value added, followed by retail trade. These two sectors were also the largest industries included in the ORSA statistics for both compensation ($67.3 billion) and employment (2.1 million) in 2017. BEA released prototype statistics for states, which found that Hawaii, Montana, Maine, Vermont, and Wyoming had the five highest proportions of state GDP generated from outdoor recreation in 2017.

Summary: In addition to the ORSA statistics, which are measured for the nation as a whole or for individual states, federal agencies sometimes measure the specific economic impact of federal lands. According to some studies, visitors to federal lands generated $55 billion in value added in FY2012 and $53.9 billion in value added in FY2016 (FY2017 dollars). Differences in methods, data, and assumptions mean any comparison between these figures and the ORSA statistics can be highly general at best.

Summary: It is difficult to precisely measure the total amount of outdoor recreation that Americans engage in, due to differences in data collection, measurement, definitions, and other factors between sources. One source, the National Survey on Recreation and the Environment (NSRE), measures the number of people who engage in 17 different outdoor activities and how often they do so. According to the NSRE, over 194 million respondents (approximately 82% of respondents) engage in the most popular form of outdoor recreation (visiting developed sites) in a given year. Americans report engaging in the most popular surveyed activity, viewing nature, over 32.4 billion times in a given year, although this activity is a major outlier. Rates of participation in surveyed activities vary substantially and can depend on geographic location, proximity to recreation resources, demographic factors, and other influences.

Summary: In FY2017, lands managed by the four federal land management agencies (the Bureau of Land Management, Fish and Wildlife Service, Forest Service, and National Park Service) had approximately 596 million visits. Lands managed by other federal agencies (the Bureau of Reclamation, National Oceanic and Atmospheric Administration, and United States Army Corps of Engineers) also had significant visitation. Visits to the lands of these other agencies sometimes exceeded visits to lands managed by the four federal land management agencies. Although publicly owned lands (including federal lands) generally have the greatest amount of recreation visits, private lands can dominate certain types of recreation, particularly in the eastern United States.

Congress plays an overarching role in shaping outdoor recreation throughout the nation through legislation and oversight. Congress's role in outdoor recreation resources, policies, and programs often involves the agencies that manage recreation resources on federal lands and waters. However, Congress also has supported crosscutting legislative, analytic, and planning efforts dedicated to outdoor recreation broadly, and it has established programs that facilitate recreation on nonfederal lands. Legislation, hearings, and congressional reports have indicated the significance of outdoor recreation economic activity as a decisionmaking consideration in many contexts, not just those involving federal lands. As Congress continues to debate outdoor recreation issuesâincluding provision of federal resources, planning efforts, and fundingâdata on the size, distribution, and relative importance of the outdoor recreation economy may inform these debates.

In April 2016, the Secretary of the Interior announced that the Department of the Interior would sign a memorandum of understanding with the Department of Commerce to undertake a feasibility study to analyze outdoor recreation's impact on the U.S. economy. The Secretary noted that "credible data on the tangible economic benefits of public lands" would be a valuable resource for stakeholders, including Congress, and that the study would count the contributions of the outdoor recreation economy in a "comprehensive and impartial" way. Later that year, Congress explicitly authorized these efforts through passage of the Outdoor Recreation Jobs and Economic Impact Act. In addition to ensuring the availability of economic data on outdoor recreation, the act ensured methodological uniformity with other statistical activities of the Bureau of Economic Analysis (BEA) that analyze the economic impact of private industries.

The act directed the Secretary of Commerce, acting through BEA, to assess and analyze the outdoor recreation economy of the United States and its contributions to the economy generally. The act required the Secretary to consider employment, sales, and contributions to travel and tourism, in addition to any other items the Secretary considered appropriate. Consequently, BEA developed the Outdoor Recreation Satellite Account (ORSA), an account using the same data and methods as BEA's gross domestic product (GDP) statistics.

BEA released the first ORSA prototype statistics for comment in February 2018, and it released the first official ORSA statistics in September 2018. BEA released the most recent ORSA statistics on September 20, 2019. Congress has indicated general approval of the ORSA and directed BEA to develop regional statistics in future years; BEA included state-level prototype statistics in the 2019 release. The House Appropriations Committee also directed the Department of Commerce, in coordination with the agencies of the Federal Recreation Council, to continue to refine the account and to report on the feasibility of identifying amounts allocated by the federal government to outdoor recreation efforts.

BEA prepares the ORSA statistics as required by the Outdoor Recreation Jobs and Impact Act. The most recent ORSA statistics, released in September 2019, measured the period from 2012 to 2017.

The ORSA "measures the size of the outdoor recreation economy and the link between outdoor recreation and the broader U.S. economy." BEA constructed the ORSA by isolating outdoor recreation spending and production from the broader industries and categories that BEA already tracked. BEA compiles data into industry accounts (e.g., retail trade, manufacturing, construction, and others) and uses all this data to calculate gross domestic product (GDP). The ORSA is a satellite account in that it isolates and combines the parts of many individual industries that are related to outdoor recreation. For example, as described by BEA, existing industry accounts show "the production of all apparel, whereas the ORSA shows the production of apparel used specifically for outdoor recreation activities, such as wetsuits and hiking boots."

The ORSA divides outdoor recreation activity into core activities and supporting activities. Core activities include the production and purchase of goods and services used directly for outdoor recreation, such as equipment, fuel, concessions, and fees. Supporting activities are defined as goods and services that facilitate access to outdoor recreation activities, such as travel and tourism expenses, local trips, construction, and government expenditures that support outdoor recreation (including local, state, and federal spending). BEA also organizes its statistics using conventional and broad views of outdoor recreation. The conventional activities include "all recreational activities undertaken for pleasure that generally involve some level of intentional physical exertion and occur in nature-based environments outdoors," such as camping, fishing, hiking, and hunting. Other activities include additional activities undertaken for pleasure that occur outdoors that may not meet the conventional definition (i.e., do not require intentional physical exertion or occur in a nature-based setting), such as outdoor concerts and festivals and games and sports fields. The two categories of activities can be combined to generate a broad view of the outdoor recreation economy.

BEA calculates the ORSA from the same data used to calculate GDP broadly. Â As such, the ORSA is directly comparable to other BEA products, including other satellite accounts, like those for arts and cultural production. In addition, the estimates used to create the ORSA follow internationally recognized standards for national accounting, including creating GDP, value added, and other measures. Thus, in theory, the ORSA results can be compared to other measures of GDP, gross output, and value added, although differing assumptions, data, and methods may influence to what degree other measures are equivalent to ORSA statistics. As described above, the ORSA combines data from many different BEA industries; thus, although very general comparisons can be made, direct comparisons risk double-counting. For example, comparing the size of the ORSA to the size of the apparel industry would be inaccurate, because some value added from the apparel industry is included in the ORSA.

Outdoor Recreation Satellite Account Estimates

According to the ORSA statistics, in 2017, the current-dollar value added of the outdoor recreation economy was $427 billion. The outdoor recreation economy accounted for 2.2% of GDP. As shown in Figure 1 , supporting activities, such as construction and travel and tourism expenses, accounted for approximately half of outdoor recreation value added in 2017, approximately $213.9 million current dollars. Conventional outdoor recreation accounted for 30.7% of value added. Other recreation accounted for 19.3%.

BEA organizes its accounts by industry. BEA reports that the arts, entertainment, recreation, accommodation, and food services industry was the largest contributor to the outdoor recreation economy in 2017, accounting for $112.9 billion of current-dollar outdoor recreation value added. The second-largest industry in 2017 was retail trade, accounting for $95.7 billion of current-dollar value added. Figure 2 provides a full breakdown of contribution to value added by industry.

BEA reported that the outdoor recreation economy generated approximately 5.1 million jobs in 2017. The arts, entertainment, recreation, accommodation, and food services industry was the largest industry included in the ORSA for both compensation ($67.3 billion current dollars) and employment (2.1 million) in 2017. Retail trade was the second-largest industry for both compensation ($49.8 billion current dollars) and employment (1.6 million) in 2017.

The largest amount of value added in 2017 from an individual conventional outdoor recreation activity (as defined by BEA) came from boating/fishing, accounting for approximately $21Â billion in current-value dollars, or approximately 5% of value added from outdoor recreation (see Figure 3 ). The activities that generated the most value added are not necessarily the most popular, according to an FS participation survey. For example, although equestrian activities were among the six largest activities in terms of value added, an FS survey found that equestrian activities were among the three smallest activities for number of participants (see " National Outdoor Recreation Participation " for more information).

Although much of the economic activity tracked by BEA to calculate value added can be linked to a specific activity (see " About the Outdoor Recreation Satellite Account "), some economic activity cannot. For example, multiuse apparel and accessories (such as backpacks, bug spray, and other items) that can be used for many activities accounted for approximately $48.6 billion in current dollars, or over 11% of value added.

In real terms, the outdoor recreation economy grew 3.9% between 2016 and 2017, faster than the 2.4% growth for the overall U.S. economy. Real gross output, compensation, and employment all grew faster in the outdoor recreation economy than in the overall economy in 2017. Between 2012 and 2017, the outdoor recreation economy grew by approximately 9.9%.

In 2017, BEA released prototype statistics on the percentage of each state's GDP from outdoor recreation (see Figure 4 ). BEA's preliminary results found that Hawaii, Montana, Maine, Vermont, and Wyoming had the five highest proportions of state GDP from outdoor recreation. However, other measures of economic importance vary considerably by state. For example, California, Florida, and Texas had the highest total outdoor recreation value added. Wyoming, Hawaii, and Alaska and Maine (tied) had the highest percentage of state employment from outdoor recreation. The relative importance of recreation in individual states depends on the size of the outdoor recreation economy, the state's economy generally, and the state's employment and compensation patterns. It is unclear to what extent these estimates may change if BEA adjusts its methods for calculating state statistics. Official state statistics are scheduled for release in fall 2020.

In addition to the estimates created by BEA, researchers, advocacy groups, and industry associations create estimates of the outdoor recreation economy. Many groups estimate impacts of individual activities, sectors, geographic areas, or outdoor recreation areas (e.g., angling, winter snow sports, a given watershed, or a given state). The broadest of these is the Outdoor Industry Association's (OIA's) Outdoor Recreation Economy report, which has been produced annually since 2006. Prior to publication of the ORSA, OIA estimates were sometimes cited to gauge the size of the outdoor recreation economy as a whole.

According to OIA's 2017 report, the outdoor recreation economy generated $887 billion in consumer spending, the majority of which ($702 billion) was trip and travel spending, including airfare, lodging, fuel, groceries, tickets, lessons, guides, and other unspecified expenses spent anywhere away from home. OIA estimates that the outdoor recreation economy directly supports 7.6 million jobs. OIA also estimates that the outdoor recreation economy generates $65.3 billion in federal tax revenue and $59.2 billion in state and local tax revenue.

OIA's estimates of the size of the outdoor recreation economy, and other estimation efforts, cannot be directly compared to the ORSA. This may be due to differences in method, assumptions, measurement, or statistics reported. Specifically, the OIA reports measure consumer spending and tax revenue, which are not part of the ORSA and are not directly comparable to any statistic reported in the ORSA. OIA's estimate of jobs (7.6 million) is higher than BEA's estimate of jobs (5.2 million), but it is unclear to what extent the data reported are similar in measurement or whether they represent the same year.

BEA excluded exports and imports in its calculation, and these figures may be captured in OIA's statistics. BEA states that external reports on the outdoor recreation economy that include "activities with a high share of spending on imported goods and services (such as apparel) will likely have higher estimates than the ORSA." BEA also states that other reports may include spending on items not used for outdoor recreation (for example, bicycles used for commuting). In general, because other reports do not give the same statistics as the ORSA, and due to methodological differences, it is unclear whether (and to what degree) the ORSA and other reports may or may not be in disagreement, despite apparent large differences in results.

The results of the ORSA and OIA reports have certain broad commonalities. For example, both reports find that large amounts of economic activity are driven by activities requiring relatively expensive purchases, such as vehicles (for example, boating or off-highway vehicle activities). Both reports also find that expenses related to travel, such as lodging, airfare, and food away from home, constitute large shares of the economic activity generated by outdoor recreation.

According to one source, measures of national trends in outdoor recreation participation are based primarily on the National Survey on Recreation and the Environment (NSRE), a population-based survey conducted by the U.S. Forest Service (FS), sampling all areas of the country and participation in 17 outdoor activities. The NSRE measures both participation (the number of respondents who report engaging in the activity at least once over the course of a year) and consumption (the number of times the respondent indicates engaging in the activity). The survey does not estimate the total number of participants in outdoor recreation generally, only participation rates in the 17 activities studied. The most recent NSRE was completed for the period 1999-2009, and an update is ongoing.

The NSRE estimated that, for the activities considered, a maximum of 194 million people (visiting developed sites) and a minimum of 8 million people (primitive skiing) participated every year (see Table 1 for additional details). FS estimated that approximately 82% of NSRE respondents participated in visiting developed sites, the activity with the highest participation rate. In terms of the frequency with which participants engaged in each activity (shown as "Activity Days" in Table 1 ), FS estimated that participants engaged in the most popular activity (viewing nature) over 32.4 billion times; this activity, however, is a major outlier, and participants engaged in the next several most popular activities between 8.3 billion and 1.8 billion times.

Between 1999 and 2009, FS estimated that participation in nature-based outdoor recreation generally increased. The number of U.S. participants in the surveyed activities increased by 7.1% over this period. Certain activities, such as those oriented toward viewing and photographing nature, off-highway vehicle activities, and several physically challenging activities (e.g., kayaking, snowboarding, surfing) had relatively large increases in participation compared to the average over this period.

More people overall participate in outdoor recreation in the eastern United States than in the western United States, in large part because most of the U.S. population resides in the East. However, participation rates (measured as the number of participants per hundred people) are higher in the West for all activities except hunting and fishing. In addition to this broad trend, demographic factors, such as population size, age, gender, race, ethnicity, education, and income, are correlated with the rate of outdoor recreation. For example, relative to the general population, people engaging in hunting and fishing are more likely to be rural residents, and people engaging in skiing and snowboarding are more likely to be urban residents. Availability of and proximity to recreation settings also are highly correlated with the rate of outdoor recreation participation.

The amount of recreation that occurs on lands of differing ownershipâfor example, federal, state, local, and privateâlikely varies widely by activity and location (see section on " Recreation Visits to Federal Lands " for further discussion of recreation on federal lands).

Approximately 60% of lands in the United States are privately owned, and approximately 28% of the total land area is federally owned; the remainder is in a mix of state, local, tribal, and other ownerships. Over 92% of federal land is located in 11 western states and Alaska. The uneven distribution of federal land between the eastern and western United States influences what lands provide outdoor recreation opportunities in different regions of the United States, particularly given that, for some federal land management agencies, at least half of visits to the properties they administer come from people who live within 50 miles.

FS found that private lands were a more important recreation setting in the East, with the total number of recreation visits on private lands in the East nearly four times the number in the West. In the West, respondents reported that they spent the majority of activity days in all surveyed activities on publicly owned lands of any kind. In contrast, respondents in the East spent the majority of activity days in some surveyed activities on private lands and some on publicly owned lands.

The ORSA statistics measures the state of the outdoor recreation economy generally. From the standpoint of public lands management, there is often congressional interest in how the government's provision of recreational opportunities translates into economic activity in communities around federal recreation resources. Legislation, hearings, and congressional reports have indicated the significance of this economic activity as a policy consideration in contexts involving federal lands. In the past decade, federal agencies and interagency groups have conducted studies measuring economic contributions specific to federal lands. Because these studies examine multiple agencies under a single framework, and because they report value added, the results are comparable to one another. In the sense that value added is a consistent concept, they also may be generally comparable to other measures of value added, such as the ORSA results, although differences in methods, data, and assumptions mean any comparison can be, at best, highly general.

According to these studies, in FY2017 dollars, visitors spent approximately $54 billion in the local economies of federal recreation areas in FY2012 and $49.8 billion in FY2016, generating $55 billion in value added in FY2012 and $53.9 billion in value added in FY2016 (see Table 2 ). The studies indicate that outdoor recreation on federal lands directly supported 880,000 jobs in FY2012 and 826,000 jobs in FY2016.

The authors of the studies in Table 2 limited their studies of visitor spending to areas within 50 miles of the federal recreation site. The authors state that this limitation provides a conservative estimate. Although research suggests that many visits to federal recreation sites do indeed originate from nearby, the nationwide estimates discussed above (see " The National Outdoor Recreation Economy ") indicate that a large proportion of economic activity derives from travel-related expenses. If the travel-related portion of economic activity related to federal sites is not being captured in these results because that activity occurs more than 50 miles from the federal recreation site, these studies may undercount the true value. Similarly, results of national studies indicate that activities requiring major purchases (e.g., vehicles) account for a large proportion of the outdoor recreation economy. If visitors do not report such expenditures, it also may result in undercounting. The agencies used different methods to measure visitation and economic activity; thus, estimates may be only generally comparable.

Federal Lands' Recreation Resources and Uses

Federal lands comprise approximately 640 million acres in the United States, about 28% of the total land area. Approximately 92% (573 million acres) of federal lands are located in 11 western states and Alaska, with over one-third (224 million acres) of all federal land in Alaska alone. The Forest Service (FS) and the Bureau of Land Management (BLM) manage the majority of federal land. Nearly all federal land is open and available to the public for recreation.

Although there is considerable overlap in the recreation opportunities across agencies, some agencies could be considered to have dominant niches. FS and BLM offer a range of opportunities, from camping, picnicking, and birdwatching in developed settings to activities in undeveloped backcountry, motorized recreation, and others. Opportunities on Fish and Wildlife Service land emphasize wildlife, fish, and birds. The National Park Service (NPS) is associated with "iconic natural and cultural resources." Opportunities on land owned by the Bureau of Reclamation, National Oceanic and Atmospheric Administration, and U.S. Army Corps of Engineers (USACE) tend to center on water and underwater resources. Although some agencies' resources are used mostly by locals, all agencies have resources with regional, national, or international markets.

Table 3 presents information from various sources on recreation visits to federal lands from FY2012 to FY2017. In general, these statistics are not comparable to the NSRE estimates given above due to differences in measurement. The statistics indicate that, in general over this period for agencies with complete data, FS and NPS had the most visits. These statistics underscore that size and location are imperfect predictors of recreation resource use; USACE, for example, has higher visitation than several agencies that manage more federal land area. These differences may be due to proximity to population centers, the types of resources available on different lands, and other factors.