| Potential Imperfection | Public Equity Market | Public Debt Market | Private Equity Market | Private Debt Market |
| Competition (Supply side) | Extensive | Extensive | Limited, depends on location, investment, and sector | Moderate, depends on location, investment, and sector |
| Information Access | Extensive publicly available information provided by firms. Firms followed by analysts | Extensive publcly available information provided by firms. Credit ratings available | Must be collected and analyzed by investor; may not be feasible for small transactions | Must be collected and analyzed by lender; may not be feasible for small transactions |
| Transaction Costs | High costs to firm for legal, disclosure, printing, and underwriters’ fees | High costs to firm for legal, disclosure, printing, and underwriters’ fees | Low to moderate costs, primarily for legal work | Low to moderate costs, primarily for legal work |
| Rational Profit-Maximizing Behavior | Cyclical factors and fads affect investor demand; may be discrimination for or against certain industries | Cyclical factors and fads affect investor demand; may be discrimination for or against certain industries | Cyclical factors and fads affect investor demand; may be discrimination for or against certain industries | Regulations affect types of loans. Discrimination for or against certain industries, type of firms, locations, etc. may occur |
| Regulatory Factors | Impose high transaction costs | Impose high transaction costs | Nonregulated | Limits types and level of risk; banks are required to meet community credit needs |
| Conclusions | Not viable for raising small amounts of equity below several million dollars | Not viable for raising small amounts of debt below several million dollars | Hard to raise small amounts of equity. Available largely for firms with very high growth potential and capacity for IPO or acquisition. | Most important capital source for small firms and development projects; limited supply of long-term debt, small loans, and riskier financing |
From: Seidman, Local Economic Development (2005), p. 16.