What consolidation might bring Conclusion Reference Small business has a special place in American public policy. Small businesses are said to be important elements of growth and development, and even are seen as essential threads in the national moral fabric. Small business lending is one area in which banks appear to dominate other types of financial firms. Yet surprisingly little is known about the structure of small business lending by banks.
Anecdotes suggest that small banks in particular are big lenders to small business.
If this is true, developments in the banking industry that affect small banks also might touch small businesses. In this Weekly Letter we use a relatively new source of information on small commercial loans to look at the evidence linking small banks and small businesses, and discuss the impact of increased bank merger activity on small business credit availability. Small business borrowing Bank loans are an important part of small business finance. A 1993 Federal Reserve survey found that two-thirds of the small businesses with some outside borrowing received credit from commercial banks, far exceeding the share for other types of financial firms. Larger firms can use commercial paper and various other forms of nonbank debt to borrow funds, whereas small firms usually are unable to tap these other sources of credit.