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Does Small Business Need a Financial Fix?

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Although by most conventional economic standards the recent recession is two years past, the health of the economy remains a concern to policymakers. The slow pace of the recovery and the attendant lack of employment growth have led to the perception that a shortage of credit, especially bank lending, is part of the problem. As the story goes, the small business sector, considered a major source of job creation in our economy, is stagnating, largely because of a credit crunch. Shortages of bank credit tend to hit small businesses particularly hard because banks have traditionally been the major source of funding for this sector.

Although by most conventional economic standards the recent recession is two years past, the health of the economy remains a concern to policymakers. The slow pace of the recovery and the attendant lack of employment growth have led to the perception that a shortage of credit, especially bank lending, is part of the problem. As the story goes, the small business sector, considered a major source of job creation in our economy, is stagnating, largely because of a credit crunch. Shortages of bank credit tend to hit small businesses particularly hard because banks have traditionally been the major source of funding for this sector.


Suggested citation: Samolyk, Katherine A., and Rebecca Wetmore Hunes, 1993. "Does Small Business Need a Financial Fix?" Federal Reserve Bank of Cleveland, Economic Commentary, 05.15.1993.

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