Small Business Administration - Office of Advocacy -Office of Advocacy -
U.S. Small Business
Administration
NEWSRELEASE
February 12, 2004
Contact: John McDowell (202) 205-6941
john.mcdowell@sba.gov
SBA Number: 04-06 ADVO
Bank
Consolidation Reduces Small Business Access
To Credit, Study Shows
Credit Line
Limits Reduced, Overall Debt Levels Remain Steady
WASHINGTON, D.C. Bank consolidation can limit small
business access to credit, according to a study released today by
the Office of Advocacy. In regions with high levels of
consolidation the study found reductions in small business access
to bank credit, especially in credit limits. However, small
business overall debt levels remained steady as they turned to
non-bank financial institutions for their credit needs.
"Since small banks provide a substantial share of credit
to small firms, bank consolidation and how it relates to small
business should be a real concern for policymakers," said
Thomas M. Sullivan, Chief Counsel for Advocacy. "The overall
impact of ongoing bank consolidation is a complex issue. This
study provides one more piece of the puzzle and should be
carefully considered," he said.
Written by Drs. Steven Craig and Pauline Hardee and funded by
the Office of Advocacy, the study titled The Impact of Bank
Consolidation on Small Business Credit Availability uses data
from the 1998 Survey of Small Business Finances to examine both
credit access and credit levels of small businesses. The authors
found that bank consolidation resulted in significant reductions
in credit limits for small businesses, but that actual credit
balances had fallen by much less.
The banking industry has been undergoing an extensive period
of consolidation, which has accelerated since the federal
interstate banking legislation of 1994. Small firms are the
source of three-quarters of the net new jobs and the bulk of
their financing is from banks. Consequently, the effect of
institutional change on small business credit is a major economic
and job creation issue.
The Office of Advocacy, the "small business
watchdog" of the government, examines the role and status of
small business in the economy and independently represents the
views of small business to federal agencies, Congress, and the
President. It is the source for small business statistics
presented in user-friendly formats and it funds research into
small business issues.
For more information and a complete copy of the report, visit
the Office of Advocacy website at www.sba.gov/advo.
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Created by Congress in 1976, the Office of
Advocacy of the U.S. Small Business Administration (SBA) is an
independent voice for small business within the federal
government. Appointed by the President and confirmed by the U.S.
Senate, the Chief Counsel for Advocacy directs the office. The
Chief Counsel advances the views, concerns, and interests of
small business before Congress, the White House, federal
agencies, federal courts, and state policy makers. Economic
research, policy analyses, and small business outreach help
identify issues of concern. Regional Advocates and an office in
Washington, DC, support the Chief Counsels efforts. For
more information on the Office of Advocacy, visit www.sba.gov/advo, or call (202) 205-6533.