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The Financial Crisis and Small Business

SBA-Financial-Crisis-EffectHow Did the Financial Crisis Affect Small Business Lending in the United States?

U.S. Small Business Administration
Rebel A. Cole

First published November 2012

How did the financial crisis that began in 2008 affect credit markets in the U.S.? Anecdotal evidence suggested that small businesses, which largely rely upon banks for credit, were especially hard hit. In this study, we analyze data on small-business lending collected by U.S. banking regulators to provide new evidence on how bank credit, in general, and bank credit to small businesses, in particular, were affected by the financial crisis. These data show that bank lending to small firms rose from $308 billion in June 1994 to a peak of $659 billion in June 2008 but then plummeted to only $543 billion in June 2011—a decline of $116 billion or almost 18%. Bank lending to all firms rose from $758 billion in 1994 to a peak of $2.14 trillion in June 2008 and then declined by about 9% to $1.96 trillion as of June 2011. Hence, the decline in bank lending was far more severe for small businesses than for larger firms.

from the Executive Summary

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