The California Reinvestment Coalition released a report Tuesday showing massive declines in small business lending and investment in California from 2007 to 2009, providing a first-hand statistical view of the financial meltdown's effects on small business and the economy as a whole.

According to the report, small business lending dropped by nearly 1.5 million loans, equaling $21 billion, from 2007 to 2009. The report also noted a 71 percent drop in Small Business Administration-backed loans over the same period - equating to a loss of $1.2 billion.

"Taxpayers bailed out the banks to the tune of $700 billion and were promised that banks would increase lending to small businesses," said Alan Fisher, executive director of the California Reinvestment Coalition. "These small businesses employ half of all Americans, but instead of saving these jobs, banks turned their backs on small businesses and neighborhoods across the state."

Alarmingly, lending to minority-owned small businesses dropped even more - 81 percent among African-Americans and 84 percent among Latinos.

As the economy slowly pulls itself toward recovery, small businesses - employers of nearly 50 percent of the U.S. private workforce - are seen as a driving force. With entrepreneurs who are looking to incorporate in California unable to find credit, economists anticipate a widespread national recovery will not take place until a significant portion of small businesses can obtain such loans.

Tags : ca, financial management, small business management

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Posted: Dec 8th, 2010