The escalation of interest rates and heightened prices, compounded by a limit on bank charges, have intensified the strain on small business proprietors and complicated lending scenarios for many banks. The inflationary interest-rate landscape has led to more restrictive credit avenues across numerous banking institutions. In the current climate, banks are exercising extreme prudence in their credit decision-making processes, thereby exacerbating credit acquisition difficulties for small-business owners.
However, small-business owners can potentially mitigate these challenges by turning to smaller, community-based lenders, especially Community Development Financial Institutions (CDFIs). These institutions can provide not only access to credit but also a broader range of support typically neglected by larger financial entities.
Building a relationship with CDFIs can be beneficial, as they are specially equipped to comprehend the needs of small businesses, and they often foster closer collaborations with them.
Concerns about obtaining loans are growing among small businesses, with a recent MetLife and U.S. Chamber of Commerce quarterly survey revealing that 76% of respondents believe the escalating interest rates are curtailing their credit access. This is a marked increase from the previous quarter’s 66% and a year ago when the figure stood at 60%. The rising rates are not just limiting their borrowing power but also hampering their growth. Half of the small-business owners surveyed have postponed their expansion plans due to high-interest rates, and 74% find it increasingly difficult to service their existing loans.
Businesses are resorting to a combination of alternate financing methods. The survey shows that 71% are dipping into personal savings, 67% are leveraging credit cards, and 59% are turning to local banks or credit unions for their financial needs.
Concerns about obtaining loans are growing among small businesses, with a recent MetLife and U.S. Chamber of Commerce quarterly survey revealing that 76% of respondents believe the escalating interest rates are curtailing their credit access. This is a marked increase from the previous quarter’s 66% and a year ago when the figure stood at 60%. The rising rates are not just limiting their borrowing power but also hampering their growth. Half of the small-business owners surveyed have postponed their expansion plans due to high-interest rates, and 74% find it increasingly difficult to service their existing loans.
As a result, these businesses are resorting to a combination of alternate financing methods. The survey shows that 71% are dipping into personal savings, 67% are leveraging credit cards, and 59% are turning to local banks or credit unions for their financial needs.
