Credit availability is a pertaining issue in the current economy. Thus getting capital to start up a new business has turned out to be a huge problem for new businesses. Thus loans to small businesses have been reduced since it’s not very profitable for the already financially depressed banks and financial institutions. The issue is that the pertaining economic conditions have tightened the credit availability to small firms.
The Federal Reserve has tightened the lending standards and these figures have broken all previous records since in a survey over 65% claimed to be suffering from the tightening credit standards on commercial and industrial loans. Whereas this ratio was 50% previously and even 7% only in the beginning of the year 2008. The first figure that is Figure 1 (U.S; 2008) in the appendix has been made out of a survey carried out and it shows that the lending standards have been tightened to a great extent since 66% of the officers claimed to feel the credit crunch and this figure has increased from 32% previously. There was no participant in the survey claiming that lending standards are good and that they have not felt the credit crunch because every person in the economy has suffered from the credit crunch prevailing. Thus due to the change in the policies of lending by the Federal Reserve small businesses and new start ups have decreased immensely since credit availability has tightened at an alarming rate. Another Figure that is Figure 2 (U.S; 2008) in the appendix shows that Small business administration loans have also tightened and that has even made the availability of credit a big problem for small investors. There are also the 504 loan programs that have slowed down and almost come to a halt now which has further increased the existing problem for the small investors
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