Changes

<onlyinclude>Since the Great Recession of the late 2000’s, [[:Small Business|small business]] owners have encountered difficulties in getting [[:Access to Capital|access to capital]]. This difficulty has a pervasive effect on small business owners’ ability to not only start, but grow. Small business owners have, when surveyed, indicated that sparse access to capital is the primary threat to small business growththeir operation. Slimming credit availability, rising student debt, and ineffective regulation changing landscape in the loaning market have culminated in significantly contributed to an industry-wide decline in access to capital for small business.

For over a decade, bank loans have been In the most frequent form wake of financing utilized by small business. In the years following recession, the "Great Recession", however, reasonable bank loans have been tough loaning environment to come bysmall business has changed. It This is common knowledge that a result of a few major factors, both on the recession was caused largely by loaning side (banks) and the collapse of a market supported by risky debtreceiving one. As suchStarting with the businesses, banks small businesses were hit disproportionately hard in the focus recession. A series of heavy regulationstudies conducted by the Harvard Business School showed that small business accounted for 60% for job losses and experienced an 11% decrease in total employment. Acts like Dodd-Frank especially impact smaller "community" banksThis second figure lies almost twice as high as the total loss for large firms, which commonly finance small business7%. Moreover, businesses with fewer than 50 employees realized 14% losses of employment. A study done by the markets for debt also penalized New York Fed corroborates these banksfindings. The NY Fed study actually adds to them, as demand for debt-backed securities stagnatedwell. The researchers in this study also conducted a survey, and even began decreasingfound that most small business owners indicated that the lack in sales and commercial activity primarily sparked the decline in employment. Since 2007the recession, Banks small businesses have been cautious about notably slower to recover. Especially since 2009, larger businesses have posted higher growth rates in sales, inventories, and fixed assets. Actually, small businesses have seen their fixed asset growth go negative for the acquisition first time since 2006. All things considered, slower sales, inventories, and investment culminated in sluggish recovery for small businesses. By extension, banks have been wary of new debt. Consequentlyspurious loans, especially to small business, loan requirements tightenedas their credit ratings have been adversely affected in recent years.

From a regulatory perspective, 2007 provoked a wave of interventionist, discretionary monetary, regulatory, and fiscal policy. Of all Despite the federal regulation adopted in significant credit rating deduction incurred by the wake of '07recession, perhaps the most impactful is the Dodd-Frank Act of 2010small businesses have been able to find loans from alternative sources. Passed, in partTraditionally, smaller banks have catered to small businesses unable to tighten the restrictions on the acquisition and sale of risky debtqualify for loans from institutional investors, the DFA established the Consumer Financial Protection Bureauor bigger banks. The Consumer Financial Protection BureauIn 2010, CFPB small and community banks accounted for short, prevents risky mortgage lending and regulates all credit and debit-based agreements48. Since its inception, the CFPB has increased compliance regulations and requirements to be met by 1% of all commercial bankssmall business bank loans, regardless of size. These regulations carry formidable costs and alterations according to the standard operating procedures for smaller banks. A 2014 Mercatus Center at George Mason University indicated that. Consequently, across 200 small businesses have a vested interest in the well-being of their community banks, compliance costs rose at an average of 5%, . Unfortunately for small banks are especially concerned with the scope of CFPB's powerbusiness, and 25% of small these community banks are considering mergers with larger banks, and others are trimming their credit optionsdisappearing at alarming rates. These three conclusions indicate a general decline in credit availability from small Small bankshave, which provide a large share of small business bank loans. Beyond the regulation's imposed decline in community bank offeringssince 1993, markets for debt have also become less attractiveseen their total numbers fall by almost 50%.  Especially in the years leading up to the mid 2000's financial crashIn 1993, the Collateralized Debt Obligation (CDO)over 11, was the most common debt-backed security being sold by large financial institutions000 banks were around. EffectivelyNowadays, the CDO was a bundle of mortgages that were almost certainly going number is closer to 6,000. These dramatic decline could be paidaccredited to a few things. As Primarily, it appears that many small banks simply cannot compete, and have dropped out of the market for mortgages (the housing market) stayed afloat and even increased, which was an assumed constant at this time, CDO's would appreciate. A seemingly foolproof plan quickly became extremely spurious, as the demand for CDOMercatus Center report shows that small banks's began to outweigh share of the supply. Once this happened, crediting institutions and investment banks began searching for more mortgages domestic deposit market fell by 50% (from 40 to include 20%) in their CDO'sthe last 15 years. SoonMeanwhile, the pursuit of these mortgages reached largest 5 banks have "picked up the doorsteps slack" and acquired a current portion of people with poor credit39. In other words6%, there was significant risk contrary to their 19% holding in default on these new batch of mortgages2001. HoweverBeyond that, institutions pushed these CDOsmall banks's all the sametotal assets have been halved since 2000, and soon began making CDOdon's t show signs of CDO's! Obviouslyimproving. Smaller banks with consistently profitable operations have been acquired, so as to accommodate for higher regulatory costs, when the bubble burstsearch costs, and the housing market collapsedtransaction costs. In a nutshell, these institutions (commercial and investment it is a difficult time for small banks) looked unreliable, at . Trends indicate that consolidation is the very leastmost feasible route to maintain solvency in today's credit market. As a result ofsmall banks' overall decline in activity, credit loaning to small businesses has taken a hit.