March 28, 2007 -- The number of loans made to small businesses has grown at annual rate of 14.3 percent since 2001, according to a report by TowerGroup Research, a Needham, Mass.-based research and consulting firm.

At the same time, small-business loan balances have increased at a compound annual growth rate of 7 percent between 2001 and 2005, indicating a need for banks to shift more lending to small business, the report said.

"Banks are making a stronger effort to lend to small businesses due to the high growth potential. However, there is a clear disconnect between banks and small businesses," Patricia Hines, a TowerGroup researcher, said in a statement.

To capitalize on growth opportunities, banks should also invest in systems that automate their small-business lending process, the report said.

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