Fed Survey: Small Banks Vital Source of Credit for Rural Businesses

Small businesses located in rural areas are more likely to apply to a small financial institution for credit, according to a recent survey published by the Federal Reserve Bank of Atlanta. Sixty-two percent of rural businesses applied to small banks for credit, while 43 percent of urban businesses did, and 66 percent of rural business owners said that having an existing relationship with a lender was a key factor in deciding where to apply for financing.

Compared to businesses in urban areas, more rural businesses also reported having higher credit scores, experiencing fewer financial challenges in the previous 12 months and receiving the full amount of financing they sought from a lender. Rural businesses were also more likely to indicate that they had sufficient financing; 51 percent said they had enough financing, compared to 45 percent of urban firms.