I can’t tell you how many business owners I’ve talked to over the last month who’ve lamented their lack of ability to go forth with their growth plans.
The biggest culprit? Banks are tightening their standards on credit underwriting, and other nontraditional sources of capital aren’t in a risk-taking mode.
This observation is backed by the latest quarterly data collected by the Fed on banks’ lending trends. According to the Fed’s survey, the percentage of banks that plan to impose stricter terms on small business borrowers has risen steadily over the past year-and-a-half, and is higher now than it has been the past few years.
Most banks worth their weight in assets will admit that it’s just harder to get approved for loan these days.
The problem with this conservatism is that we need a certain level of risk to drive our economy. If small business is truly the backbone of the economy, and capital is the fuel that drives most companies, then the tightening of lending standards can only send us back into the recession mode that we’re slowly climbing out of.
Some economists are saying a double dip recession is on the horizon. The term “double dip” refers to an economic condition that has reached a low, found a temporary floor, and then dives again.
Many economists are just now admitting that the high unemployment rate, lack of consumer spending and low consumer confidence we’ve experienced over the last year was really a recession that officially began in March 2001.
They’re admitting this now that there’s evidence it might be ending. But if banks and other lenders don’t fuel entrepreneurism, the double dip forecast could become a reality.
I can’t tell you how many business owners I’ve talked to over the last month who’ve lamented their lack of ability to go forth with their growth plans.
The biggest culprit? Banks are tightening their standards on credit underwriting, and other nontraditional sources of capital aren’t in a risk-taking mode.
This observation is backed by the latest quarterly data collected by the Fed on banks’ lending trends. According to the Fed’s survey, the percentage of banks that plan to impose stricter terms on small business borrowers has risen steadily over the past year-and-a-half, and is higher now than it has been the past few years.
Most banks worth their weight in assets will admit that it’s just harder to get approved for loan these days.
The problem with this conservatism is that we need a certain level of risk to drive our economy. If small business is truly the backbone of the economy, and capital is the fuel that drives most companies, then the tightening of lending standards can only send us back into the recession mode that we’re slowly climbing out of.
Some economists are saying a double dip recession is on the horizon. The term “double dip” refers to an economic condition that has reached a low, found a temporary floor, and then dives again.
Many economists are just now admitting that the high unemployment rate, lack of consumer spending and low consumer confidence we’ve experienced over the last year was really a recession that officially began in March 2001.
They’re admitting this now that there’s evidence it might be ending. But if banks and other lenders don’t fuel entrepreneurism, the double dip forecast could become a reality.
