Small-business owners will have to navigate higher interest rates and a potential recession to secure financing in 2023 — and that means fewer financing options and higher costs.
“As the economy slows, we expect banks to further reduce their exposure to small-business credit, expanding an already sizable void in critical financing for growing small businesses,” said, chief operating officer at small-business financing firm Kapitus. “As banks scale back their lending to small businesses, and less-mature alternative lenders struggle to meet demand, small-business owners will have fewer options for financing.
New lines of credit have also seen significant rate increases while existing lines of credit have seen increased usage, according to the analysis. “Given the rising rate environment, small-business owners can expect to pay more for capital and as a result, should be judicious with their cash flow and conservative with plans for expansion,” he said.“To be best prepared, small-business owners should be considering their funding options today and developing relationships with both banks and alternative lenders in order to understand what capital they qualify for and at what price.
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