What Do Small Businesses Need Banks for, Anyway?

Photograph by Matthew Staver/Bloomberg

At the end of June 2008, just months before the collapse of Lehman Brothers prompted credit to seize up, there was $327 billion in small business loans outstanding, according to the Federal Deposit Insurance Corp. Five years later, the value of small business loans had fallen 12 percent, to $289 billion. That’s probably a conservative estimate of the toll that the financial crisis took on banks’ willingness to make small loans. Earlier this summer, the Cleveland Fed reported that small-business lending fell 78 percent from the summer of 2007 to the end of 2012, accounting for inflation.

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