A Credit Crunch That Lingers

By EMILY MALTBY

Where's the money? The economy is on the mend. The government has launched a boatload of programs to get small businesses financing. President Barack Obama has urged banks to give the companies a "third and fourth look" before rejecting them for loans.

Yet entrepreneurs are still struggling to land credit. Only half of small businesses that tried to borrow last year got all or most of what they needed, according to a survey by the National Federation of Independent Business. In the mid-2000s, 90% of businesses said they got the loans they needed.

What's going on here? Why is the credit crunch alive and well when it comes to small businesses?

Part of the problem is that most of the government programs created to address the problem have focused on Small Business Administration loans, which total less than 10% of overall lending to small companies. But there's a wider issue at work. Banks and the government are trying to avoid repeating the mistakes that led to the subprime meltdown. It's a perfectly understandable goal—but it's freezing up financing. Click Here to continue reading...