Working Paper Series
Small Businesses and Small Business
Finance during the Financial Crisis and the
Great Recession:
New Evidence from the Survey of
Consumer Finances
Arthur B. Kennickell
Board of Governors of the Federal Reserve
System
Myron L. Kwast
Federal Deposit Insurance Corporation
Jonathan Pogach
Federal Deposit Insurance Corporation
Current Version: September 2015
FDIC CFR WP 2015-04
fdic.gov/cfr
NOTE: Staff working papers are preliminary materials circulated to stimulate discussion and critical
comment. The analysis, conclusions, and opinions set forth here are those of the author(s) alone and do
not necessarily reflect the views of the Federal Deposit Insurance Corporation. References in publications
to this paper (other than acknowledgment) should be cleared with the author(s) to protect the tentative
character of these papers.
Small Businesses and Small Business
Finance during the Financial Crisis and the
Great Recession:
New Evidence from the Survey of
Consumer Finances
Arthur B. Kennickell
Board of Governors of the Federal Reserve
System
Myron L. Kwast
Federal Deposit Insurance Corporation
Jonathan Pogach
Federal Deposit Insurance Corporation
Current Version: September 2015
FDIC CFR WP 2015-04
fdic.gov/cfr
NOTE: Staff working papers are preliminary materials circulated to stimulate discussion and critical
comment. The analysis, conclusions, and opinions set forth here are those of the author(s) alone and do
not necessarily reflect the views of the Federal Deposit Insurance Corporation. References in publications
to this paper (other than acknowledgment) should be cleared with the author(s) to protect the tentative
character of these papers.
1
Small Businesses and Small Business Finance During the Financial
Crisis and the Great Recession: New Evidence From the Survey of
Consumer Finances
Arthur B. Kennickell†
Myron L. Kwast‡
Jonathan Pogach‡
This Draft September 29, 2015
Abstract
We use the Federal Reserve’s 2007, 2009 re-interview of 2007 respondents, and 2010 Surveys
of Consumer Finances (SCFs) to study how small businesses owned and actively managed by
households fared during those turbulent years. Even though the surveys contain extensive
data on a broad cross-section of firms and their owners, to the best of our knowledge this is the
first paper to use these SCFs to study small businesses. We find that the financial crisis and the
Great Recession severely affected the vast majority of small businesses, including tight credit
constraints. We document complex interdependencies between the finances of small
businesses and their owner-manager households, including a more complicated role of housing
assets than reported previously. We find that workers who lost their job during the recession
responded in part by starting their own small business, and that factors related to the survival
of a small business are hard to identify. Our results support the importance of relationship
finance to small businesses and the primary role of commercial banks in such relationships. We
find that both cross-section and panel data are needed to understand the complex factors
associated with the creation, survival and failure of small businesses.
JEL Codes: D12, D22, G21, L25, L26
Keywords: Small Business, Entrepreneurship, Great Recession, Credit Constraints
† Board of Governors of the Federal Reserve System, Washington, DC. The views expressed are those of the
author and do not necessarily reflect those of the Board of Governors or its staff.
‡ Federal Deposit Insurance Corporation, Washington, DC. The views expressed are those of the authors and do
not necessarily reflect those of the FDIC or its staff.
The authors thank Alicia Robb, our conference discussant, the conference volume editors, and Yan Lee, Philip
Ostromogolsky, and Robin Prager for very helpful comments and suggestions; and Cody Hyman for excellent
research assistance. All errors are the sole responsibility of the authors.
Small Businesses and Small Business Finance During the Financial
Crisis and the Great Recession: New Evidence From the Survey of
Consumer Finances
Arthur B. Kennickell†
Myron L. Kwast‡
Jonathan Pogach‡
This Draft September 29, 2015
Abstract
We use the Federal Reserve’s 2007, 2009 re-interview of 2007 respondents, and 2010 Surveys
of Consumer Finances (SCFs) to study how small businesses owned and actively managed by
households fared during those turbulent years. Even though the surveys contain extensive
data on a broad cross-section of firms and their owners, to the best of our knowledge this is the
first paper to use these SCFs to study small businesses. We find that the financial crisis and the
Great Recession severely affected the vast majority of small businesses, including tight credit
constraints. We document complex interdependencies between the finances of small
businesses and their owner-manager households, including a more complicated role of housing
assets than reported previously. We find that workers who lost their job during the recession
responded in part by starting their own small business, and that factors related to the survival
of a small business are hard to identify. Our results support the importance of relationship
finance to small businesses and the primary role of commercial banks in such relationships. We
find that both cross-section and panel data are needed to understand the complex factors
associated with the creation, survival and failure of small businesses.
JEL Codes: D12, D22, G21, L25, L26
Keywords: Small Business, Entrepreneurship, Great Recession, Credit Constraints
† Board of Governors of the Federal Reserve System, Washington, DC. The views expressed are those of the
author and do not necessarily reflect those of the Board of Governors or its staff.
‡ Federal Deposit Insurance Corporation, Washington, DC. The views expressed are those of the authors and do
not necessarily reflect those of the FDIC or its staff.
The authors thank Alicia Robb, our conference discussant, the conference volume editors, and Yan Lee, Philip
Ostromogolsky, and Robin Prager for very helpful comments and suggestions; and Cody Hyman for excellent
research assistance. All errors are the sole responsibility of the authors.