【正文】 titutability among these alternative sources of finance. Beyond this interest in the microfoundations of small business finance is a growing interest in the macroeconomic implications of small business finance. For example, the impact of the .“ credit crunch” of the early 1990s and the effect of the consolidation of the banking industry on the availability of credit to small business have also been the subject of much research over the past several years. Similarly, the “credit channels” of moary policy mechanisms through which moary policy shocks may have disproportionately large effects on small business funding has generated considerable analysis and debate. Other key issues, such as the link between the initial public offering (IPO) market and venture capital flows, prudent man rules regarding institutional investing in venture capital, and the role of small firm finance in financial system architecture are just beginning to attract research attention. The private markets that finance small businesses are particularly interesting because they are so different from the public markets that fund large businesses. The private equity and debt markets offer highly structured, plex contracts to small businesses that are often acutely informationally opaque. This is in contrast to the public stock and bond markets that fund relatively informationally transparent large businesses under contracts that are more often relatively generic. Financial intermediaries play a critical role in the private markets as information producers who can assess small business quality and address information problems through the activities of screening, contracting , and monitoring. Intermediaries screen potential customers by conducting due diligence, including the collection of information about the business, the market in which it operates, any collateral that may be pledged, and the entrepreneur or startup team. This may involve the use of information garnered from existing relationships of the intermediary with the business, the business owner, or other involved parties. The intermediary then uses this information about the initial quality of the small business to set contract terms at origination (price, fraction of ownership, collateral, restrictive covenants, maturity, etc.).A contract design and payoff structure is chosen on the basis of the financial characteristics of the firm and the entrepreneur as well as the firm