Need a Small Business Loan? Good Luck With That
Bigs continue to get bigger, while We the People of Slavelandia suffer
Small businesses, especially startups, are finding it harder to get new loans, while some existing businesses are seeing their credit lines cut, The Wall Street Journal reported.
Other borrowers are running into higher interest rates, stricter terms, and more probing questions from lenders.
PUTIN CALLS DAM ATTACK ‘BARBARIC’
Almost half of banks have toughened their lending regimens for small businesses, according to a U.S. Federal Reserve survey of banks in May. More than half said their standards will become even tougher as this year progresses.
The median interest rate for an adjustable-rate small-business loan in last year’s fourth quarter was 7.44 percent, up from about 4 percent a year earlier
The median interest rate for an adjustable-rate small-business loan in last year’s fourth quarter was 7.44 percent, up from about 4 percent a year earlier. More recent figures are not available.
Many small businesses hesitate to borrow at such a high rate, according to the WSJ.
Banks became more stringent in their lending standards last year as the economy began to slow.
Then the March failure of Signature and Silicon Valley banks in the U.S. and Credit Suisse in Switzerland made small and regional banks anxious about their liquidity after depositors shifted their cash to “fail-safe” megabanks, another Fed survey found.
Many banks have had to cut their dollar volume of loans to bring it into balance with deposits.
“Falling asset values, deteriorating credit quality, and a reduced tolerance for risk have also dimmed banks’ appetite for new loans,” the WSJ noted.
Small businesses tend to borrow from local or regional banks, David Mericle, Goldman Sachs’ chief economist, pointed out in a WSJ interview.
“The alternative to borrowing from your local small bank is another form of financing that is going to be notably more expensive,” he said.
Many local banks are steering potential borrowers to the U.S. Small Business Administration, which guarantees repayment.
This year through April, the number of loans made through the agency was 14 percent more than the rate through 2022, government data showed.
Although deposits at U.S. banks fell by $500 billion during this year’s first quarter, total profits amassed by American banks during the period totaled almost $80 billion and set a record.
If U.S. banks had been forced to dump low-interest government bonds they had bought early in the COVID War, they would have faced losses as great as $515 billion, the FT said.
TREND FORECAST: Low-interest government bonds issued pre-COVID are finding no buyers these days because interest rates have risen to 5 percent or more over the past 14 months.
Also, the high-interest rates will not only hurt small businesses, it will put many out of business, increase unemployment, and decrease consumer spending which will in turn worsen the socioeconomic and geopolitical implications of the recession.
I wish there was an alternative to the like button when reading this article.
I wrote similar elsewhere, a few months ago. I remember the early 80ies of the last century, in Europe. My husband started a small business and had a bank-loan at 16 %. My mortgage - small cold-water, third floor walk-up apartment - was 12.5%. All around a lot of misery as many people were unemployed.