How Did the Financial Crisis Affect Small Business Lending in the U.S.?

Journal of Financial Research

109 Pages Posted: 31 Jul 2011 Last revised: 23 Jul 2020

See all articles by Rebel A. Cole

Rebel A. Cole

Florida Atlantic University

Jason Damm

University of Miami

Date Written: July 22, 2020


We analyze changes in lending by U.S. banks to businesses during 1994 – 2011. We find that
lending to businesses and, in particular, to small businesses, declined precipitously following
onset of the financial crisis. We also examine the relative changes in business lending by banks
that did, and did not, receive TARP funds from the U.S. Treasury, and find that banks receiving
capital injections from the TARP failed to increase their small-business lending. Finally, we find
strong and significant positive relations of both bank capital adequacy and profitability with
small-business lending.

Keywords: availability of credit, bank bailout, bank credit, bank lending, bank regulation, business subsidies, capital purchase program, credit crunch, entrepreneurship, financial crisis, small business, TARP

JEL Classification: G01, G21, G28, G32, H25, H8

Suggested Citation

Cole, Rebel A. and Damm, Jason, How Did the Financial Crisis Affect Small Business Lending in the U.S.? (July 22, 2020). Journal of Financial Research, Available at SSRN: or

Rebel A. Cole (Contact Author)

Florida Atlantic University ( email )

College of Business
777 Glades Road
Boca Raton, FL 33431
United States
1-561-297-4969 (Phone)


Jason Damm

University of Miami ( email )

5250 University Drive
Coral Gables, FL 33146
United States
(941) 587-9425 (Phone)

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