Ben Bernanke, Chairman of the Federal Reserve, reiterated on Thursday that small business owners who relied on their homes as collateral for loans face “challenging” conditions. This environment extends to American business owners who have solid FICO credit scores over 650.
Bernanke also stated that lending to small businesses has fallen 15 percent from its peak in 2008 before the credit crisis affected banks ability to lend. This “credit tightness” has affected the economy’s ability to grow. He outlined the Fed’s “Operation Twist” as a way to spur financial institutions to lend.
This statement follows years of negative outlook on business lending. Conditions have improved in some sectors but the prospects for the majority of small businesses are continue to look to dim. In reality retail banks have decided that lending to small businesses is not as profitable as consumer banking and can be quite risky.
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