Federal Reserve Bank of Cleveland Report – Small Business Lending Challenges

Why Small Business Lending Isn’t What It Used to Be Scott Shane and Ann Marie

Since the Great Recession, bank lending to small businesses has fallen significantly, and policymakers have become concerned that these businesses are not getting the credit they need. Many reasons have been suggested for the decline. The report shows that it has multiple sources, which means that trying to address any single factor may be ineffective or make matters worse. Any intervention should take all of the many causes of the decline in small business lending into consideration.

While bankers, small business owners, and regulators all point to different sources for the drop in small business credit, a careful analysis of the data suggests that a multitude of factors explain this decline in credit.

Scott Shane is a visiting scholar at the Federal Reserve Bank of Cleveland and the A. Malachi Mixon, III, Professor of Entrepreneurial Studies at the Weatherhead School of Management at Case Western Reserve University.

Ann Marie Wiersch is a policy analyst at the Federal Reserve Bank of Cleveland. She has worked on several Federal Reserve System initiatives, including projects focused on small business issues and state and local government finance.

Learn More: http://www.clevelandfed.org/research/commentary/2013/2013-10.cfm

SOURCE: Federal Reserve Bank of Cleveland