Small businesses throughout the United States aren’t expanding their payrolls, in large part because banks continue to subject them to tighter lending standards than those imposed on big business.

 

A congressional report stated that hiring by small firms continued to decline in 2009 and in the early part of 2010, thanks to banks’ unwillingness to loan them money. The total number of loans to small businesses has dropped 17.8% since the second quarter of 2008.

 

The problem has big implications for the U.S. economy because about 75% of all jobs are provided by businesses with fewer than 250 employees. On June 17, the House of Representatives passed the Small Business Jobs and Credit Act, which would create a $30 billion lending fund that would provide capital for small businesses through community and small banks. The Senate passed its version of the bill on September 16.

-Noel Brinkerhoff, David Wallechinsky

 

Small Business Employment: Banking Lending Restrains Job Creation (U.S. Congress Joint Economic Committee) (pdf)