Statement for the Record RE: Transparency in Small Business Lending

The Cato Institute is a public policy research organization dedicated to the principles of individual liberty, limited government, free markets, and peace. Cato’s Center for Monetary and Financial Alternatives, of which I am an associate director, is dedicated to revealing the shortcomings of today’s centralized, bureaucratic, and discretionary monetary and financial regulatory systems and to identifying, studying, and promoting alternatives more conducive to a stable, flourishing, and free society.

Recent Trends in U.S. Small Business Lending
U.S. small businesses account for 43.5 percent of U.S. gross domestic product and 47.3 percent of private‐​sector employment. Yet they face unique challenges in their access to credit which of private‐​sector employment. Yet they face unique challenges in their access to credit which the economic uncertainty stemming from the Covid‐​19 pandemic has underlined. Most smallbusiness borrowers need relatively small loans that are individually expensive to underwrite, originate, and service unless done on a large scale. But many small businesses also have special circumstances and funding needs that do not fit the standard credit box, which explains why they have historically benefited greatly from relationship lending.