Business Law News Headlines

Small Banks Profit From Relationship Lending

Market valuations of smaller publicly-held banks are higher than they would otherwise be due to their investment in relationship lending, according to a study issued today by the Office of Advocacy of the U.S. Small Business Administration. The study examined the link between market valuation and small business lending for 817 publicly-held banking organizations during the period 1994 through 2005.

“This study shows that for smaller banks it is worth the time and effort to invest in relationship lending,” said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. “The market values the added profit that comes from personally knowing small business customers, and being able to offer them loans and services not obtainable from other banking organizations.”

Many times small firms have little or no collateral and younger firms do not have a credit history on which to base banking decisions. These firms may be excluded from “transactional” financing decisions that require credit scoring and other analysis of hard data used to evaluate the credit worthiness of the business and its owner. Read more at sba.gov.

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	Did You Know?
	Negligence can relate to business activity Negligence is a tort, meaning it is a kind of wrongful act giving rise to a civil court action, usually for damages. Business activity can give rise to negligence in many different ways, for example, through selling defective goods or defective services. To show there has been negligence a plaintiff (someone bringing a case of negligence against a company) must prove the company had a legal duty of care, was in breach