“Bank lending is absolutely critical to our economic growth. Small businesses are the backbone of our economy and they depend on access to credit to grow, expand and create jobs." - Jamie Dimon, Chairman and CEO of JPMorgan Chase
As banks adjust to elevated interest, a weakening macroeconomic outlook, and fear of contagion effects of financial sector instability, US bank lending is decelerating and the tightening of lending standards is expected to continue. The failures of Silicon Valley Bank and Signature Bank in America and the enforced merger of Credit Suisse with UBS in Switzerland compound financial instability in the US and Europe. Credit availability in the US and Europe will be limited due to increased wariness among bankers and a quick dissipating risk appetite, which Figures 1 and 2 below demonstrate with the narrowing loan and credit supply due to stricter credit assessment standards.
The current decrease in available credit is bringing about worries of a credit crunch, particularly for smaller banks placed under pressure on their assets. Business owners should hurry to secure loans and credits for their companies before supply gets slim, beginning with the US then expanding to Europe and thereafter, Asia, due to the influence of the US Dollar as a trading currency extending beyond national boundaries. Fearful of banks' inability to handle higher interest rates has caused alarm of a potential credit crunch that could be just as destructive as it was in 2008's Global Financial Crisis when banking system collapses curtailed credit access.
Notably, US banking institutions have been lowering credit provision for eighteen months now, indicating a gloomy macroeconomic situation and further proving risk tolerance has diminished. Q4 2022 revealed that 43.8% of banks reported stronger loan acceptance criteria for small firms compared to 31.8% observed during Q4 2022 according to reports. Commercial and industrial loan growth has slowed while bank deposits that had been an ample source up until recently have decreased; this sequence leads to an equivalent reduction of 25-100bps of policy tightening which implies an extended Federal Funds rate from 5.25% - 6% at Q1 2023's end.
To temper inflation sustainably requires steady tightening for extended periods – this contraction happening within US banking reflects financial conditions being further tightened; this trend is anticipated to continue with corporate bankruptcies set to rise slightly over ensuing quarters. To protect from another financial crisis such as those seen in 2008, central banks will seek out strategies for preserving financial stability yet business owners must act quickly before loan access drops further horizontally starting with the US then Europe with Asia soon following suit if conditions remain unchanged. Smaller US banking establishments are challenged currently by higher interest rates coupled alongside slower progress while real estate activity may also take a hit due to strain on these smaller banks; simulations suggest GDP growth during 2023 could be affected moderately before plummeting harder starting 2024 – Fed works cautiously now aiming at reducing inflation safely while protecting financial sector stability too. Business owners need not wait any longer but secure available loans soonest to prevent a more critical economic recession occurring later down the line.
Figure 1: Tightness of US lending standards and US loan availability
Figure 2: Tightness of US financial conditions
Now, you know how grave the situation is when it comes to getting the financing your business needs. Is it all doom and gloom for small to medium size businesses?
What must you do to hasten the process of securing the business loans and credits that your business requires?
What must you do if your business has a patchy and inconsistent track record in getting business loans and credits.
Time to upend this dismal trend? Learn what is needed to better engage your bankers so that your business can get the loans and credit required!
This Business Finance course empowers business owners and key decision makers when it comes to obtaining financing and credit from bankers and financiers. Loans and credits should be granted to businesses regardless of their size or perceived management quality. The course architect, who has 25+ years of banking experience, has observed an uneven allocation of loans and credits. Many do not end up being used in economically productive ways, while larger businesses often win the lion's share. We strive to give all businesses a level playing field. The core aim is to enable individuals to take control of the process. The course provides preparation needed, along with toolkits and step-by-step guidance. It also aims to make learners aware of how to engage bankers/financiers so that they are more likely to get continuous support for financing/credit. This will help the overall economy become more productive as big businesses won't monopolise loan/credit distribution; the most deserving businesses will get them instead.
The objectives of this course are: 1) learn what drives and motivates bankers when they agree to lend, 2) understand how bankers think/decide when lending, 3) apply what you’ve learned in your business - analyse & prepare a case for why you should receive loans/credit, 4) prepare & enable yourself to tell your business story in order to impress bankers/financiers & 5) win support for continuous financing/credit from them - because other bankers tend to follow suit once someone agrees with you.
The delivery will include an introduction on key operating indicators which are important for lenders/financiers, understanding why these indicators matter within their context, learning what motivates them when granting loans/credit, discovering how you should present your side of the story & beginning by showing how your business can service & repay debt before delving into its future valuation & why it is worth investing in it.
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