At a Federal Reserve conference in Washington this week, Fed Chairman Ben Bernanke called upon banks to increase their lending to small businesses.
“Making credit accessible to sound small businesses is crucial to our economic recovery,” said Bernanke, a vocal proponent of loosening credit for smaller companies.
While many big firms are flush with cash and are expected to report strong profits during earnings season, smaller businesses have struggled to secure the loans they need to expand and hire. Economists point to this disparity as a reason that the recovery has not been as robust as was hoped.
Small businesses generally spur job creation during recoveries and employ roughly half of all Americans.
Unless these borrowers are able to get loans to expand operations and make new hires, experts fear that the economic rebound will slow in the second half of 2010. Business owners, who identified credit lines and working capital as key financial needs, point to the declining value of real estate and other collateral used securing loans has been part of the challenge in securing funding.
In May, the Obama administration sent Congress a proposal to create a $30 billion stimulus program designed to encourage small and mid-sized banks to loosen credit for the nation’s small businesses. The legislation has not yet passed in the Senate.
- The Reason for Decline in Small Business Lending Eludes Experts
- Difficulties in Borrowing Continues for Small & Medium Businesses
- Findings of New York Fed Survey Reveals Credit Constraints for Small Businesses
- Small Lending Institutions bullish about SBA Guaranteed Loans
- Office Depot partners with SBA to lend to small businesses