Small business lending may not be such a bad deal for banks after all. A new study released by the SBA Office of Advocacy investigates the contribution of relationship lending to the value of banks by estimating the market premium placed on the small business loan portfolios of banks. Small business lending was found to be a profitable market niche, especially, for small publicly traded banking organizations in the United States. This evidence suggests that at least for small banks, the added revenue associated with relationship lending exceeds the added information costs associated with evaluating and monitoring small business commercial and industrial loans.
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