THE CHALLENGES OF OBTAINING SMALL-BUSINESS LOANS With the financial of the late in a amounts to big W 2000s came a three-punch cash flow eased back on elevated credit requirements, "large" small businesses ($10 milmorations or in revenue). Therefore, many startups and small businesses still may be unable to secure a bank loan and will have to continue relying on alternative financing sources." knockout for many small businesses: fall- ing sales, lack of collateral to apply for loans due to plummeting values of commercial and residential real estate, and difficulty finding banks willing to issue small-business loans. Even when the economy began to recover, banks remained cautious and risk-averse, and stricter regulations required them to retain more capital and therefore lend less generously. However, things are looking up for the small-business lending environment. During the recovery from the latest recession, the amount of small-business loan applications approved by large banks grew from 9.7 to and rising property values allowed small- business owners to return to using real estate as collateral. These trends are expected to continue as the economy further rebounds. On the other hand, significant barriers continued to prevent the lending environment from returning to pre-recession levels. Tradi- tionally, small community banks were a large source of small-business loans, but many went out of business with the market crash; now, rather than their numbers rising again, the industry is moving toward increased consolidation in fewer, larger banks. These banks do not make much money on smaller loans (under $1 million) and so focus more on Discussion Questions 1. Why is it important for small businesses to have access to loans and other financing? 2. Can you think of reasons why the bank- ing industry might be moving toward con- solidation, rather than seeing a rebound in smaller community banks? 3. If a small business cannot get a bank loan. where else could it look for financing?