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Fed Data: Small Business Loans Have Higher Interest Rates

Written by Ken Gaebler
Published: 7/12/2010

Small businesses are subject to tougher borrowing conditions according to the Federal Reserve.

Many small businesses have had a difficult time receiving funding since the recession began, and according to recent data from the Federal Reserve, there are numbers to back the claims.

Entrepreneur Mixed Financial Results

According to the Fed's "Terms of Business Lending," the average rates on small business and industrial loans worth approximately $500,000 were 3.5 percent higher than the federal fund rate. The difference in these rates is the highest since the numbers started being tracked in 1986, according to the Financial Times.

But many banks dismiss this news for small businesses because of the potential risks involved in loaning money during the slow economy.

"If I am a small business at the moment, I don’t have any customers so don’t want to buy more inventory. I am not expanding my plant, I don’t need to buy a new truck and I don’t need to hire workers, so I am not asking for a loan," said William Dunkelberg, chief economist at the National Federation of Independent Business in an interview with the news source.

In recent weeks, President Barack Obama has encouraged Congress to pass the Small Business Fund Act. The fund would give $30 billion to community banks for the purpose of lending to small businesses.

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