Fed to hold forum to boost small-business lending

July 7, 2010 1:58:30 PM PDT
The Federal Reserve said Wednesday it will hold a forum next week to explore ways to improve the flow of lending to small businesses.

It's the latest effort by the Fed to tackle the problem, which dates back to the 2008 financial crisis. Congress and the White House also want to see banks lend more to small businesses.

Small businesses - more so than big companies - rely on bank loans to expand operations and hire. Small businesses usually help drive job creation during recoveries but tight credit has hurt hiring.

Leaders from small businesses, trade group, financial institutions among others will participate in the July 12 conference.

The conference comes after the Fed has held a series of more than 40 regional meetings this year on the matter.

Federal Reserve Chairman Ben Bernanke has acknowledged that it is hard to tell whether the problem is more reflective of banks shying away from making loans to small business or a lack of demand from those companies.

Many lawmakers on Capitol Hill have complained that small businesses that want to take out loans are having trouble getting them, while some banks say demand is weak. The Fed has urged banks to make loans to creditworthy small businesses.

Lending to small businesses has declined even as the economy has improved. Lending has dropped from almost $700 billion in the second quarter of 2008, a period when the country was embroiled in a financial crisis, to $660 billion in the first quarter of this year.