It appears that the government bailouts to major banks in the 2008-09 financial crisis did little to help small business lending- in fact, the opposite is true. According to a Bloomberg Businessweek article entitled “TARP Verdict: Bailouts Failed to Help Small Business,” the banks that took bailout money cut lending to small businesses even more than other banks (21% drop compared to 14% elsewhere). Commercial and industrial loans were the hardest hit.
So what’s the takeaway here? Banks still aren’t lending money to small businesses. Small companies that meet the requirements for bank loans are few and far between, and approval is unlikely. In order to stay afloat, small businesses must turn elsewhere for financing. Several financing options are discussed in the “Alternatives to Bank Loans” blog post below. For the full Bloomberg article, click here.