At a Federal Reserve conference in Washington this week, Fed Chairman Ben Bernanke called upon banks to increase their lending to small businesses.
“Making credit accessible to sound small businesses is crucial to our economic recovery,” said Bernanke, a vocal proponent of loosening credit for smaller companies.
While many big firms are flush with cash and are expected to report strong profits during earnings season, smaller businesses have struggled to secure the loans they need to expand and hire. Economists point to this disparity as a reason that the recovery has not been as robust as was hoped.
Small businesses generally spur job creation during recoveries and employ roughly half of all Americans.
Unless these borrowers are able to get loans to expand operations and make new hires, experts fear that the economic rebound will slow in the second half of 2010. Business owners, who identified credit lines and working capital as key financial needs, point to the declining value of real estate and other collateral used securing loans has been part of the challenge in securing funding.
In May, the Obama administration sent Congress a proposal to create a $30 billion stimulus program designed to encourage small and mid-sized banks to loosen credit for the nation’s small businesses. The legislation has not yet passed in the Senate.
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