In addition collateral owned by small businesses lost value during the financial crisis potentially making small business borrowers less creditworthy today—in fact small business credit scores are lower now than before the Great Recession. The Federal Reserve s Survey of Small Business Finances indicated that the average PAYDEX score of those surveyed was . . By contrast the NFIB Annual Small Business Finance Survey indicated that the average small company surveyed had a PAYDEX score of.
Moreover the values of both commercial and residential real estate which represent two thirds of the assets of small business owners and are often used as collateral for small business loans were decimated during the financial crisis. On the supply side banks remain more risk averse in the recovery Chinese Overseas America Number Data then they were prior to the recession. Measures of tightening on loan terms including the Federal Reserve Senior increased at double digit rates during the recession and recovery and have eased at just single digit rates over the past several quarters. Loosening has been much slower and more tentative for small firms than for large firms. Regarding points of access to capital community banks have long been crucial to small business lending. But community bank failures have been high and few new ones have started up.
Troubled and failed banks reached levels not seen since the Great Depression during the financial crisis of with the failures consisting mostly of community banks. This environment—where troubled local banks appear unable to meet re emerging small firm credit needs—would be an ideal market for new banks but new charters are down to a trickle. In fact a year recently went by with no new bank charters issued by the Federal Deposit Insurance Corporation FDIC the first time that happened in the agency s year history.