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Collateral Damage for Small Business Credit

Collateral Damage for Small Business Credit
Photograph by Jens Goerlich/Gallery Stock

September 15 marks the fifth anniversary of the bankruptcy of Lehman Brothers, an event that many see as having catalyzed the passage of Dodd-Frank. While small business loans were not a cause of the financial crisis, the regulatory response to the crisis has made small business credit more difficult to obtain.

The number and value of small loans has shrunk substantially over the past five years. Federal Deposit Insurance Corporation Call Report data show that both the number of and the inflation-adjusted value of non-farm, non-residential loans of up to $1 million—a common proxy for small business loans—declined by 27 percent fromk June 2008 to June 2013.