Getting Credit Harder For Small Businesses

On 5th anniversary of the fall of Lehman Brothers and 2008 financial crisis, entrepreneurs still face capital challenges

September 15 will mark the fifth anniversary of the bankruptcy of Lehman Brothers, a key event marking the financial crisis of 2008. Small business loans were not the cause of the financial downfall, but regulators response to the crisis has made small business credit more difficult to obtain then and now.

Banks tightened lending standards in response to new regulatory pressure. Lenders reduced loans to marginal borrowers—some of whom would have obtained credit under pre-crisis standards, reports

In fact, the number and value of small loans has fallen significantly in the past five years. According to a Federal Deposit Insurance Corporation Report, data shows that number of loans for up to$1 million declined by 27% from June 2008 to June 2013

Moreover, roughly 25% of entrepreneurs responding to the Wells Fargo/Gallup Small Business Index survey for the third quarter of 2013, stated that obtaining credit was difficult over the past 12 months and 22% said it was easy, whereas in the third quarter of 2008, respondents who stated it was difficult or easy were 14% and 41%, respectively.

According to data from the Federal Reserve, four-fifths of small business owners have a personal or business credit card used for business purposes. New restrictions on credit-card issuers that were meant to protect consumers also have made it harder for small business owners to tap credit-card financing.

  • Very Helpful info. Thanks!

  • Don’t believe all of the hype that money isn’t available for lending to small businesses. Just because lending slowed by 27% from 2008 levels means virtually nothing. Lending in 2007 and 2008 was inflated because we were nearing the end of the huge run up in real estate values. Money is available in the United States.

    Remember that having $1 in reserve can bring you $8 in lending. That’s a banking formula… invention of my own. And I’m not a fan of so called fractional banking.

    The real question is….do black banks understand the $1 and $8 guideline? Based on my discussions with black bank CEO’s……the answer is NO. I could name a few black banks that are undercapitalized …..that are brand names…… but that wouldn’t accomplish anything and they would just be “outed”. No need for that as they have their own problems. But it would help if these Bank Presidents or Chairpersons of the Board would be open to new ideas…..

    I mean……how many banks were able to lend in black communities and take advantage of the real estate run up to help underdeveloped areas? Answer: Very Few. And that’s a shame.

    Can’t blame that one on white folks.