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How Community Banks Are Wooing Small-Business Customers

This story appears in the October 2011 issue of Entrepreneur. Subscribe »

Community EffortThe small-business lending situation is a lesson in irony: Despite government efforts to spark more lending, uptake is down. In June, the SBA reported that in the first quarter of 2011, loans to small businesses fell $15 billion, marking the third straight quarter of decline. That figure has been trending downward since 2008--but this drop comes in the wake of major government efforts to incite more lending.

Much of the problem, it seems, is not lack of available capital, but lack of demand for it among small businesses. A combination of recession-born pragmatism and tougher lending restrictions has all but strangled the regular flow of capital from banks to small businesses.

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