Bank consolidation can limit small business access to credit, according to a new study released today by the SBA?s Office of Advocacy. In regions with high levels of consolidation the study found reductions in small business access to bank credit, especially in credit limits. However, small business overall debt levels remained steady as they turned to non-bank financial institutions for their credit needs.

?Since small banks provide a substantial share of credit to small firms, bank consolidation and how it relates to small business should be a real concern for policymakers,? said Thomas M. Sullivan, Chief Counsel for Advocacy. ?The overall impact of ongoing bank consolidation is a complex issue. This study provides one more piece of the puzzle and should be carefully considered,? he said.

Written by Drs. Steven Craig and Pauline Hardee and funded by the
Office of Advocacy, the study titled The Impact of Bank Consolidation on Small Business Credit Availability uses data from the 1998 Survey of Small Business Finances to examine both credit access and credit levels of small businesses. The authors found that bank consolidation resulted in significant reductions in credit limits for small businesses, but that actual credit balances had fallen by much less.

The banking industry has been undergoing an extensive period of consolidation, which has accelerated since the federal interstate banking legislation of 1994. Small firms are the source of three quarters of the net new jobs and the bulk of their financing is from banks. Consequently, the effect of institutional change on small business credit is a major economic and job creation issue.

The Office of Advocacy, the ?small business watchdog? of the government, was created by Congress in 1976. As part of the SBA, the Office of Advocacy examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats and it funds research into small business issues.

For more information and a complete copy of the report, go to: For more information on the Office of Advocacy, visit, or call (202) 205-6533.