Friday, August 17, 2007

Capital Crunch - Should Small Business Worry?

The volatility in the capital markets over the last few days have been nothing short of astonishing. Today's announcement by the Federal Reserve to reduce the discount rate enabled the stock market to break its string of daily losses. What's the impact on the typical small business and its ability to obtain a business loan?

Probably not much.

For the typical small business borrowing money tied to the Prime Rate, you may have to sit tight until September 18th when the Federal Reserve has its next scheduled meeting of the Federal Open Market Committee to consider adjusting the target for the Fed Funds Rate which would have direct impact on the Prime Rate.

By the way, I just finished reading an email which crossed my desk from the Senior Economist at Wells Fargo Economics, Scott Anderson. It addresses both the cost and availability of business credit in general.

Anderson says that while the overall cost of credit has only increased moderately, the cost of credit for all but the most risky consumers and businesses is not yet restrictive.

As for the availability of credit, Anderson writes that the latest senior loan officer survey from the Federal Reserve shows that banks are tightening credit standards across a broad spectrum of consumer and business loans, but have not yet hit the emergency brake.

So until September 18th, enjoy the ride.

If you're not enjoying the ride and need help finding the right lender or telling your story the right way, read "Matchmaking for Business Loans" and give me a call!

Related Tags:

No comments: