Whitman School of Management at Syracuse University
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How Changes in Small Business Lending Affect Firms in Low- and Moderate-Income Neighborhoods
Vol. Volume 8, Number 2 June/2003

Daniel Immergluck, Geoff Smith
Bank mergers, the use of credit scoring, the increasing geographic scale of small business lending markets, and the changing role of nonbank financial institutions are all likely to have significant impacts on the financing of small businesses. This paper examines the impacts of such changes on small business lending in low- and moderate-income metropolitan neighborhoods. Although some firms in modest-income communities – especially those with strong, well-established credit -- may actually see improvements in access to loans, many others – especially those needing traditional, relationship-based loans and those with more marginal credit -- are likely to see increasing problems. Overall, the net effect of changes in small business lending is likely to be a continuing disparity in access to credit between lower- and higher-income areas. The paper ends by discussing implications for policies and programs and recommendations to improve credit access in low- and moderate-income communities.

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