Has small business lending recovered since the Great Recession?

What does this mean for the economy right now?

By all accounts, small business lending dropped considerably in the immediate aftermath of the Great Recession, and those companies that have survived are still waiting for the credit environment to return to what it had been previously.

What does this mean for the economy right now?

Writing for The Big Picture blog, Barry Ritholtz notes that since small businesses are directly responsible for about 40 percent of the national GDP, restricted lines of credit have a broad impact beyond just these businesses and their employees.

“If small businesses have been unable to access the credit they need, they may be underperforming, slowing economic growth and employment,” he wrote.

As the finger pointing continues between small businesses and lenders, each of whom assign blame to the other for the suppressed lending numbers—lenders say businesses are high-risk and not experiencing high demand for their products and services, while borrowers claim lending restrictions are too tight. Ritholtz notes that both parties are responsible, along with external factors outside of either’s control.

One such factor, at least in the short term, has been the government shutdown. Staff furloughs in October prevented the Small Business Administration from being able to process loans at a consistent rate. A report released this week by Experian and Moody’s Analytics determined that loan volume last month fell 35 percent year-over-year as a result.

Still, the report did say that the SBA is “on track to make up its lost ground” before the end of the year, according to Bloomberg Businessweek.

With lenders loosening restrictions on lines of credit, while still using advanced risk assessment tools, small businesses should soon be able to continue their prominent role as a driver of the economy.

Request a Demo

From loan originations and decisioning, to customer management and beyond, GDS Link helps thousands of clients manage risk while driving growth.