With higher interest rates, small businesses and lenders proceed with caution
With higher interest rates, small businesses and lenders proceed with caution
Only a quarter of small businesses say their credit needs have been met, according to the September Small Business Optimism Index from the National Federation of Independent Business released Tuesday. At the same time, two-thirds of businesses said they were not interested in getting a loan.
One of them is Rothmans, a New York clothing store.
Since last year, business at Rothmans has been pretty good. Ken Giddon, the store’s co-president, said people are going to weddings and back to the office.
“Things are under control, and for the most part, we can operate efficiently and profitably at these levels,” Giddon said.
Giddon said he doesn’t want to take on the risk of a new loan, because right now, he’s not interested in making Rothman’s any bigger.
“You know, expansion just for the sake of expansion is not necessarily a good thing. At the end of the day, it’s whether you’re making money,” he said.
Not every business is feeling so content.
Jess Harrington owns JessFinessed, a company in the Boston area that stages homes for sale with furniture, lighting and new paint. She said her revenue has doubled every year since 2019. And now, she’s at a pivotal moment.
“I either need to cap my availability and turn business away, or I will need capital in order to continue to scale,” Harrington said.
But many of the lenders Harrington’s talked to are hesitant to loan her the money she wants.
“They’re very quick to tell you, ‘No, it would be very hard for us to put you in this product. No, this wouldn’t really work,'” Harrington said.
A lot of banks have been more cautious about lending to certain sectors of the economy that aren’t doing so well. That includes commercial real estate, and the businesses that support it.
“We’ve looked at an elevator company that services office towers. We have a concern about it,” said Dominik Mjartan, CEO of Optus Bank in South Carolina.
He said he’s not pulling back from the commercial real estate sector, but he is being more diligent. That’s meant asking borrowers some tougher questions.
“What happens if your business revenues decline? What happens if the interest rates continue to increase? What happens if there is a hiccup in the economy and this mythical soft landing doesn’t happen?” Mjartan said.
Mjartan said there are plenty of other sectors that are doing OK. So he’s trying to pick up new customers that can’t get loans from other banks.
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