Studies Showing Small-Business Loans Still Slow
Historical research shows the trend started before recession
The new study has shown that the slowdown had been in full swing long before the economic collapse that was so apparent in 2008.
Cleveland Federal Reserve analyst published the latest paper, which indicated that the flow of loans through varying agencies to small companies has remained slow. The paper also noted that the funding is not likely to pick up anytime soon. The findings show a troubling relationship between small firms and banks starting to ignore the needs of the former in the last 10 years. That relation is troubling specifically because the economy was still growing at that time.
Research showed that before the heavy decline in banks lending, a large percentage of nonfarm, nonresidential loans were both small and reliable.
The report noted a multitude of factors that may have contributed to the general slowdown. The weak financials prior to the intensive decline made it difficult for owners who wanted loans to qualify for credit. Consumer demand drops were also part of the overall decline.
Given that there was a plethora of troubles, and not one obvious problem to point to, it makes the finding of a true formula for trouble difficult to pinpoint until the market ventures farther into recovery mode.
“This confluence of events makes it unlikely that small business credit will spontaneously increase anytime in the near future,” Cleveland Fed’s Ann Marie Wiersch and Scott Shane wrote in the report. “Given the contribution that small businesses make to employment and economic activity, policymakers may want to intervene to ensure that small business owners can access the credit they need.”
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