Financial lending is drying up in small communities around the country, making it harder for small businesses to stay up and running, The Wall Street Journal reported.
The kind of in-person banking crucial to many small businesses is disappearing as banks consolidate and close rural branches, the Journal reported.
"If you are not a big company with tons of assets and a big bank account, they just overlook you," peanut farmer Danielle Baker of Roxobel, N.C., told the Journal, reporting she had to travel two hours to get a loan from a nonprofit after her local bank closed.
Without a local branch close to her business, she said, "it's very aggravating on a day-to-day basis."
The value of small loans to businesses in rural U.S. communities peaked in 2004 and is less than half what it was then in the same communities, when adjusted for inflation, according to The Wall Street Journal analysis of Community Reinvestment Act data.
In big cities, small loans to businesses fell only a quarter during the same period, mainly due to large declines in lending activity during the financial crisis, the Journal reported.
According to the Journal, of America's 1,980 rural counties, 625 do not have a locally owned community bank — double the number in 1994, federal data show. At least 35 counties have no bank, while about 115 are now served by just one branch.
"There's been a slow seep, a slow letting air out of a balloon over a long period of time," Camden Fine, chief executive of Independent Community Bankers of America, a small-bank trade organization, told the Journal. "There's less demand for credit. There's less supply."
Rural communities in parts of the United States have become less attractive to local banks because they are suffering from a variety of economic ills — including weak school systems, big-box retailers, a financial crisis, and young people moving away — that have impacted business activity and business formation, the Journal reported.
Small-town businesses say bank pullbacks weaken local economies even further.
"It's hard to get a business to come in" when there is no bank to cash workers' paychecks, Rich Square, N.C., Town Commissioner Reginald White, told the Journal.
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