Jeannine Aversa, AP Economics Writer, On Thursday June 3, 2010, 11:53 am EDT
WASHINGTON (AP) -- Getting loans flowing more normally to creditworthy small businesses will help the economic recovery, Federal Reserve Ben Bernanke said Thursday.

Small businesses -- more so than big companies -- rely on bank loans to expand operations and hire. Small businesses usually help drive job creation during recoveries but credit clogs have hurt hiring.

Lending to small businesses is declining even though the economy is improving. Lending has dropped from almost $700 billion in the second quarter of 2008, a period when the country was embroiled in a financial crisis, to $660 billion in the first quarter of this year, Bernanke said in prepared remarks in Detroit. Many lawmakers on Capitol Hill have complained about small businesses wanting to take out loans but having trouble getting them.

Bernanke, however, said it's difficult to divine whether the decline in lending to small businesses was being driven more by weaker demand or reduced supply because loans are harder to get. Lenders and borrowers have different perspectives the problem, he said.