The economy will not recover until banks start lending to small businesses, said Federal Reserve Chairman Ben Bernanke.
Bernanke urged banks to loosen lending to smaller companies at a Fed conference Monday, saying that small businesses employ about half of all Americans and account for 60 percent of job creation.
Startups are especially vital, Bernanke said. Over the past 20 years, startup businesses accounted for about a quarter of all job creation.
Meanwhile, big companies are building up their cash reserves and are expected to report strong earnings in the coming week, said the Associated Press.
According to the National Federation of Independent Businesses, roughly one-third of small businesses seeking credit have had trouble getting it. Banks counter that the demand for credit remains weak.
Several big banks, including Bank of America, JPMorgan Chase and Citigroup, have pledged to increase small business lending this year. Total lending to small businesses has continued to decline, however, dropping from around $710 billion in the second quarter 2008 to less than $670 billion in the first quarter of this year, said the AP.
A number of small business owners say they are relying on personal credit cards or dipping into their own savings to stay afloat.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to