Working Paper Series, Swedish Entrepreneurship Forum
William J Dennis
Small Business Access to Credit: Yesterday, Today and Tomorrow
Abstract: Small business access to credit has been turned upside
down in the United States over the last 30 years. It has moved from a
difficult problem for small business owners and managers as a group to a
relatively modest one. The transformation is largely due to financial
services deregulation, information technology, and finance innovation.
Prominent among the latter is credit scoring. These developments raise
policy issues that are relevant to all developed countries. Among them are:
how does one measure and monitor small business credit access? What
reassessments need to be made now that credit scoring has mitigated the
market failure argument supporting government subsidized small business
finance programs? What are the dimensions of a small business credit
market? How will recent financial innovation withstand a severe recession?
Within the bounds of safety and soundness, what can/should be done to
promote de novo bank entry? And, what is the future of conventional small
business loan-backed securitization in the light of the sub-prime debacle?
Global forces have transformed the financial systems of all developed
countries. , Yet, when considering those changes and their implications for
small business access to credit, all countries start from a different
point. The author’s comments focus on the changes American small business
experienced accessing credit over the last 30 years, not because the U.S.
experience is more instructive than any other nor because the American
financial system is somehow more advanced, but simply because he knows it
better and can use its context to develop implications for small business
that appear applicable to most, if not all, of the world’s developed
countries. The paper is organized as follows: the first section briefly
addresses small business use and sources of debt finance. The second
discusses small business owner access to credit and change in it. The third
identifies three major factors that drove credit access’s decline as a
major small business problem. The fourth recognizes characteristics of the
American banking system that differ from other banking systems in developed
countries, and how that may affect small business access to debt capital.
The fifth presents six implications for small business and policymakers in
the developed world and the paper concludes with brief comments.
Keywords: credit; access; (follow links to similar papers)
JEL-Codes: A00; (follow links to similar papers)
33 pages, July 1, 2008
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Mikael Jorstig ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom