Just to be clear “bank lending has tightened” over the past few months. How do you plan to finance new growth? How are you going to upgrade business technology?
So how bad will it get? No one really knows this answer. Not even the Federal Reserve. Inflation is a dynamic issue. The impact is great. Even with the drop in the inflation rate the damage to pricing has already been done.
So how does a small business owner survive this challenge? We will try to answer this at the end of this brief blog post.
INFLATION
Annual inflation rate in the US likely slowed to 3.1% in June of 2023, which would mark a 12th consecutive month of falls (lowest since March of 2021).
The slowdown is partly due to a high base effect from last year when a surge in energy and food prices pushed the headline inflation rate to 1981-highs of 9.1%.
INTEREST RATES
The Federal Reserve will likely need to raise interest rates further to bring down inflation that is still too high, but the end to its current monetary policy tightening cycle is getting close, several U.S. central bank officials said on Monday. – Reuters
This is good news only if infaltion is brought under control.
DEBT DEFAULTS
Corporate defaults rose last month, with 41 in the U.S. so far this year. That’s more than double the same period last year, according to Moody’s Investors Service.
The number of bankruptcy filings in the U.S. this year has also sharply risen, to levels not seen since 2010.
Big Banks Receive Warning
There is a lot going on between the Federal Reserve and Big Banks. Simply put “tougher rules”. The Federal Reserve has put forth rules to lower the risk of bank failures. We all know what happened with SVB and other banks in the first half of 2023. The Feds are trying to sure up the banks and our confidence in the banks.
These new rules press banks to tighten their rules on lending, investing, and other areas that impact both consumers and small business owners. A main highlight of the rules is that banks with at least $100 billion in assets will face higher capital requirements. This will force the banks to maintain a much larger liquid assets base to guard against potential losses.
This policy will trickle down to mid-size banks as well.
New Rules = Tighter Banks = Less Available for Lending = Stronger Underwirting Guidelines
- Add Cash Flow Management Planning
- Lower Cost through New Technology
- Get Unsecured Business Credit
- Crypto - Might be a good channel
- Private Placement Memorandum
- Streamlined SBA Programs
- Business Credit Programs
When the Banks Tighten You Plan
One thing about America’s small business community is that it is resilient. Business owners survive. The key to survival is knowing when to cut-back, when to plan, and when to change their operations model.
Small business owners that fail to take action generally see more denials from tightened banks and their partners. Those that Plan are rewarded with financing even during times of tightening. Lending will continue. But the terms of borrowing and underwriting will be different than in previous times.
We encourage you to Take Action. Develop a Cash Flow Management Plan, Lower Costs, Add Resources, Learn Crypto, Consider Private Equity, Maybe and SBA BLOC, and or Build Corporate Credit.
Contact BB Bookwork’s Inc for assistance at [email protected] or visit https://bbbookworks.com/.
