Small businesses play an important role in the economy of the U.S. The most basic requirement for survival of small businesses is capital. Many businesses still have some hurdles for pooling the capital and are dependent on loans.
According to the Federal Deposit Insurance Corp., during 2009, there was a decrease in provision of bank loans by 7.4 percent which was found to be the largest drop since 1942. According to the Treasury Department, $1.5 trillion in lending was estimated to be evaporated in that year.
Provision of bank loans was started later. However, they were only available for larger firms and it was still difficult for small businesses to get loans. About 65% of employment of the U.S. was given by the small businesses. There was a very bad impact on these businesses when loans were not provided.
About $4.4 trillion was found in unused credit lines outstanding in 2009. This was because consumers and businesses shunned borrowing to pay down debt. An increase of 32 percent in U.S. bankruptcy filings was observed last year. So many companies were not worth for the credits. Low loan requests only were lent by banks. Scrutinizing the loans was done at higher level than that of the past by bank regulatory agencies.
There were still problems faced by small businesses in getting loans. This also affected the employment expansion.