Small Business Loans Defaulting at a Higher Rate

In all the shuffle to keep the "big guys" from failing, not enough emphasis has been put on small business. And now problems with the economy are finally causing that policy to come home to roost: Rising defaults on small business loans — including those for home business — could form the basis of further economic turmoil.

Small business is the backbone of the economy. Unfortunately, with headlines of big businesses failing, the "little guys" haven't been getting much attention. But with bank lending drying up, and consumer spending down, small business is really starting to feel the pinch.

CNN Money reports on this disturbing trend in small business funding:

Last year's failure rate is a sharp increase over past years.
In 2004, the SBA loan failure rate was 2.4%, but it has increased each
year since, rising to 8.4% in 2007, according to Coleman's
calculations. The 2008 failure rate of nearly 12% covers the fiscal
year that ended on Sept. 30. In that year, the SBA's 7(a) and 504
programs approved 78,324 loans, totaling $18.2 billion.

The new economic stimulus bill provides incentives for small business lending, but for some it's too late.