87% of credit applications filed by the 544 small businesses surveyed were rejected in 2011

Also………..” The Fed also discovered that denial rates for companies seeking microloans were higher than for companies applying for larger loans in the past year.”

So what does this all mean?

  1. The transactional costs of lending are disproportionately higher when the loan amounts begin to decrease.
  2. Banks are taking less risks.  If you think about it, they’re taking more risks because their loan portfolios are not diversified.
The fees on payday loans make sense b/c the risk associated with these loans are higher.  I think every payday lender would like to borrow money from the Federal Reserve at 1.5%, but we can’t.

Read more at Inc. Magazine.


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