Small-Business Financing after the Financial Crisis: Lessons from the Literature

Abstract

We survey the literature on how small businesses in the United States finance themselves. Our results demonstrate the important role that the financial services industry, particularly bank credit, plays in the capital structure of small firms. The results also reinforce the importance of owner equity as a primary source of financing. In addition, we find that small firms have been seeking and obtaining less capital since the 2008 financial crisis. Our findings about the main sources of small-business financing will be informative when formulating financial regulation. The available evidence suggests that new regulation of the financial services industry may be restricting access to products that small-business owners rely on and may adversely affect small banks.

Keywords: Finance, Financial Crisis, Financial Service, Bank Lending, Borrowing, Credit, Debt, Capital Structure, Financing, Regulation, Policy, Small Business

JEL Classification: G32