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Fed Seeks to Expand Small-Business Lending

Ian P. Murphy |

WASHINGTON — The Federal Reserve Bank is exploring new ways to boost lending to small businesses and startups, Fed chairman Ben Bernanke told a conference of small-business associations, lenders and regulators this morning.
“Making credit accessible to sound small businesses is crucial to our economic recovery,” Bernanke says. “More must be done.”
Small businesses rely on bank loans to expand and hire, he says, driving job creation in economic recoveries. Small businesses create about 60% of all new jobs, Bernanke adds. What’s more, startup businesses under two years old account for about one-quarter of gross job creation.
The tight credit that has marked the current slowdown, however, has hurt hiring. Even though the economy has shown improvement, small-business lending has declined from $710 billion in the second quarter of 2008, to less than $670 billion in the first quarter of this year.
Though the Fed has urged banks to step up small-business lending, many small businesses are still having difficulty accessing credit. Lenders often say they are returning to stricter lending standards after the home-loan free-for-all that led to the financial crisis.
In developing new policy options, the Fed should be “wary of one-size-fits-all solutions,” Bernanke says.
 

About the author

Ian P. Murphy

American Drycleaner

Ian P. Murphy is a freelance writer based in Chicago, and was the editor of American Drycleaner from 1999 to 2011.

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