Policymakers Concerned With A Threat to Small Business Lending

by | Sep 14, 2023 | Business Finance, Business Strategy, Resources, Small Business | 0 comments

Policymakers Concerned With A Threat to Small Business Lending

In an ever-evolving financial landscape, recent concerns have emerged about the potential impact of heightened capital requirements on small businesses’ ability to access credit. These concerns revolve around the Federal Reserve’s Basel III Endgame proposal, which could strain small companies grappling with increasing interest rates and strict lending standards.

The Current State of Small Business Lending

The plight of small businesses seeking capital to operate and expand has been underlined by recent findings from Goldman Sachs’ 10,000 Small Businesses Voices survey. According to the study, 70% of small business owners who applied for a new business loan in the past year found it challenging to access capital. This is a significant increase from the 61% who reported difficulties in April 2023.

These difficulties have had severe repercussions, as 76% of respondents said difficulty accessing affordable capital negatively impacted their business. Furthermore, 73% believe rising interest rates are harming their operations.

The Basel III Endgame Proposal and Its Potential Impact

The Basel III Endgame proposal, currently open for public comment, has raised concerns among 84% of small businesses. They fear the proposal, which obliges large banks to increase their capital reserves, will exacerbate their struggles to access capital in an already challenging market.

Jessica Johnson-Cope, CEO and president of Johnson Security Bureau and Chair of the National Leadership Council for 10,000 Small Businesses Voices, expressed her concerns. She said, “Small business owners appreciate the work of Congress to examine the impacts of the Federal Reserve’s Basel III Endgame, as the proposal could worsen many small businesses’ ability to access capital.”

The Echoed Concerns of Policymakers, Organizations, and Banks

Various policymakers, organizations, and banks have voiced similar worries that higher capital requirements will curtail lending and credit access for households and consumers. A significant increase in capital standards could “undermine economic growth,” according to a letter from prominent organizations including the National Housing Conference and the NAACP.

Key Survey Findings

Additional key findings from the survey highlighted the importance of business loans and lines of credit for small businesses:

  • 68% of small business owners have outstanding business loans or lines of credit.
  • 63% of those with outstanding loans or lines of credit say rising interest rates have impacted their ability to service their debt obligations.
  • 68% of those with outstanding loans or lines of credit say they could not maintain current operations or grow their business without their business loan or line of credit.

First Union Lending: Your Partner in Business Growth

At First Union Lending, we understand these challenges and offer an alternative. We give businesses the funds they need in as little as 24 hours. If you’re a small business grappling with capital access, call us at 863-825-5626 or complete an online application. We’re here to help you navigate these uncertain times.

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Only U.S.-Based Businesses are Eligible