Small businesses create every two out of three new jobs and employ half of the private sector workforce. Small business is responsible for 65% of new job creation. The current credit environment is dampening job creation as bankers say they are lending to small businesses but have trouble finding credit worthy borrowers. Small business loans are down 20% since 2008.
Reasons Why Small Business Lending Is Not Recovering
Overall business credit scores are lower and commercial real estate values took a hard hit. Commercial real estate makes up 2/3 of assets of small business owners. Banks are still more tentative to take on the risk posed by loaning to small businesses. While community banks have played an important role in small business lending they represent many of the bank failures in the past decade and few new charters have moved in to that lending space.