Little is Known about Small Business Lending

A $30 billion plan to offer capital to small banks with incentives to loan it to small businesses just passed the House of Representatives on June 17, but no one really knows whether or not it will increase small business lending.

There’s an underlying problem when it comes to small business lending – lack of information.There’s no data available to discern why small business lending is down, nor is there any information available to determine what a proper fix might be.

The three most common hypotheses are as follows:

  1. Banks are unwilling to lend,
  2. Small businesses are not interested in borrowing, or
  3. Today’s small businesses don’t have good enough credit to borrow.

In order to help shed some light on the small business lending picture, the Federal Reserve Bank of Atlanta recently started a quarterly survey. In addition, regulators are starting to make banks report small business lending each quarter, rather than annually, and the Treasury is considering using data from credit bureaus as well.

For more information, read: What We Don’t Know About Small Business Lending.