Put another way, the relationship lending process will fund small business borrowers with increasingly difficult information problems as the technology for resolving these problems improves. In my view, this should only increase the efficiency and the competitiveness of small business finance.
For example, the improved ability of banks to lend to more opaque borrowers should provide some increased competition for the venture capitalists and angel financiers that were discussed at the conference yesterday. The value of gathering information through the relationship between banks and small businesses also bodes well for the survival of small community-based banks that tend to specialize in these relationships.