Indeed, it is the sign of a dynamic economy where resources are free to flow into the production of goods and services that are most in demand and where technological change and competition require efficient production methods. These dynamics have been at work throughout the economy, and all sectors of the U.S. economy have benefited from the health of small businesses. There the trends are strong, and both small and large businesses have been important sources of new jobs. Here in Florida, given your proximity to Latin America, even if you are not directly involved in trade, you likely have a deep appreciation of the impact that events in that region can have on the United States economy. Small businesses typically have less equity to cushion bumps in earnings flows, fewer assets to pledge as collateral, and more uncertain earnings streams.
New firms have little experience or history from which to assess their operating performance.
Indeed, information on which to base credit evaluations is sparse or nonexistent. For many of these reasons, small businesses have far fewer financing options than do large firms, which can turn to the capital markets. Hence, small firms inevitably are more dependent on commercial banks and other financial institutions. Fortunately, in the last few years, credit appears to have been readily available for most qualified borrowers. However, the ongoing consolidation within the banking industry through mergers and acquisitions, the growing use of credit scoring and loan securitization, and integration of financial markets worldwide have raised new interest about the longer-run opportunities for small business financing.