US small businesses struggle for credit, one year after regional turmoil

FE Team | Published: March 10, 2024 23:54:35

NEW YORK, Mar 10 (Reuters): Small business owners in the US are struggling to get financing from traditional lenders as the impact of higher rates and bank failures of a year ago linger, holding back business growth for some.
The difficulty in getting more traditional forms of credit shows how sharp interest rate hikes by the US Federal Reserve, exacerbated by the failures of Silicon Valley Bank and Signature Bank last March are reverberating in the economy, say analysts and other industry insiders.
Small businesses are key to the country's economic health, with one study showing they account for 44 per cent of US economic activity.
Over half a dozen small business owners contacted by Reuters in the last few weeks said they had found it harder to get traditional forms of credit such as loans from big, mid-size and small regional banks.
Some were wary of turning to non-traditional lenders like fintech firms or companies that provide financing based on prospective revenues, even though these were readily available. Small businesses typically go to mid- and small lenders for loans, said industry analysts.
These small businesses were spread across the country and included restaurants, non-profit entities, retail boutiques, online education firms and mom-and-pop stores.
"I have been turned down by several small to mid-sized banks," said Gerald Williams, a Sacramento, California-based entrepreneur who owns Beale Hot Sauce, who has been looking for a $50,000 loan since last March to grow his business. Williams said the lack of funding has cost him several opportunities to grow his business, including buying a commercial kitchen.
About 77 per cent of small business owners are concerned about their ability to access capital and 28 per cent of loan applicants said they had taken out a loan or line of credit with payment terms they felt were predatory, according to a survey by Goldman Sachs released in January which included nearly 1,500 small borrowers across the country.