Access to credit
election scorecard small business

When credit to small businesses froze during the Great Recession, President Obama took several steps to help open the money spigot. He passed the Small Business Lending Act and diverted $30 billion in TARP funds to community banks to increase lending to small businesses. He also created new programs to boost Small Business Administration lending, waived the fees charged to banks for SBA loans, and boosted the federal guarantee of those loans. Recently, he launched two new funds of $1 billion each that put government funds into early-stage companies in concert with private funds.

As former private equity investor who funded such companies as Staples, Mitt Romney believes small businesses are being crushed by inadequate sources of capital. He wants to stimulate lending but has offered no concrete plan to do this.

Reality Check: Neither candidate has spent much time on the campaign trail talking about how they will help entrepreneurs gain access to capital. For all the talk of small business lending the administration claims it has worked to facilitate, the government's own numbers indicate that small business lending is headed in the wrong direction, falling in the number and value of loans since 2008, the year the president took office. Even the TARP fund that was set up to stimulate lending to small business has only dispersed $4 billion.

A host of factors are responsible for this lending crunch, including poor administration of the funds by the U.S. Treasury and a refocus by big commercial banks -- especially those that received bailouts -- on middle market lending in order to generate more revenue and meet repayment benchmarks set by Uncle Sam.

According to the Biz2Credit Small Business Lending Index, the approval rate for small business lending applications for loans ranging from $250,000 to $3 million is 14% today, versus around 40% in 2007, prior to the recession. Today, more entrepreneurs are turning to credit unions and alternative commercial credit lenders for support.

  @FortuneMagazine - Last updated November 05 2012 03:37 PM ET
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