Besides being riskier, lending to small firms can be more expensive. It costs more per dollar loaned both to evaluate their credit applications and to monitor their ongoing performance. Many small businesses lack detailed balance sheets and other financial information used by underwriters in making lending decisions.
And the small firm does not issue publicly traded debt or other securities whose values in the marketplace serve as a signal of its profit expectations. Of course, despite these challenges, many smaller businesses do manage to obtain the credit and capital they need.