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Any small business owner who recently tried to secure a loan will tell you it isn’t easy. Now data clearly shows the broader effects of this struggle.

The Wall Street Journal recently reported that the 10 biggest banks in the country that issue small loans to businesses lent $27.8 billion less in 2014 than the industry’s 2006 peak, according to the Journal’s analysis of federal regulatory filings. (1) This decline has forced many small business owners to turn to higher-cost funding sources.

The response is similar to that of individuals who are turned away by banks and then resort to expensive and risky alternatives. For businesses, these may be nonbank lenders, often in the form of online companies that require little or no collateral but that charge much higher interest rates than banks. While not all of these lenders are predatory, the space is still largely unregulated. For small amounts, some business owners are turning to nonprofit microlenders or crowdfunding to try to fill gaps, though both have serious limitations.

But many businesses are simply turning to credit cards when they cannot secure traditional small business loans. According to the Journal, small business spending on credit and charge cards will total an estimated $445 billion in 2015, compared to $230 billion back in 2006, when conventional lending was readily available. (1)

It may be more profitable for banks, but this solution is bad, and probably unsustainable, for business owners. As Robb Hilson, a small business executive with Bank of America, told The Wall Street Journal, “If someone wants to buy a forklift, it doesn’t make sense to put it on a credit card.” (1) Yet many small businesses have little other choice for now.

This result is not surprising. Large banks generally find small loans unattractive, partly because of their relatively high costs and partly because of tighter regulatory requirements. A Goldman Sachs analysis earlier this year cited the reduced availability of credit as one of the principal reasons small businesses have faltered in the wake of the financial crisis while large enterprises have largely recovered. (2) As regulators cracked down, it became uneconomical for banks to serve clients other than the most creditworthy. Startups seldom make the cut.

My own experience mirrors others. Even with a 23-year-old business that operates across the country, banks want hard collateral before they will make substantial loans. And when the chief assets of a business consist of loyal customers and really smart employees, the only available collateral is personal real estate. And even real estate was not enough at the first bank I approached; geography came into play too. If banks find our established firm too risky to make unsecured loans, many smaller or newer enterprises do not stand a chance.

With big banks out of reach, small community banks should have been ready to step into the gap, eagerly courting new customers. But that has not happened, largely because the number of such banks continues to decline. This trend predates the Dodd-Frank financial regulations, but the regulations sharply accelerated the community banks’ loss of market share.

This is not to say that all community banks are in immediate danger of going under. To the contrary, recent data from the Federal Deposit Insurance Corp. suggests that those that have held on have expanded their lending and narrowed the profitability gap with larger banks.

While this is good news, it’s not enough to fill the gap in small business lending. And it seems unlikely to do so soon, since new bank establishments have dropped nearly to zero, thus cutting off a supply of lenders who are eager for new customers. According to an FDIC report from April 2014, there were only seven new bank charters total from 2009 to 2013, compared with over 100 annually prior to 2008.

The small banks that have survived have largely done so by being just as risk-averse as the big banks with which they compete. Regulation has simply made it foolish to act otherwise. But this leaves all small businesses except those with established history, sterling credit and substantial collateral without the means to secure the capital they need to make their enterprises grow.

Small businesses are crucial drivers of new jobs and new products for our economy; their credit struggles are probably a significant reason this economic expansion has been sluggish by historical standards. We have made it unattractive for big banks to serve small businesses, and small banks are not ready to fill the gap. We all pay the price.

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