Water Cooler Talk

Have more small businesses truly turned their backs on loans?

Following the pandemic, more small businesses are reporting no need for credit, increasing from over 50% to more than 60%. This trend is similar to post-Great Recession patterns but also reflects the surge in new business formations due to remote work. Currently, ample cash reserves from government support and high borrowing costs reduce the demand for loans. The trend may reverse as interest rates drop.

Jenn Day
Jun 27, 2024

Read the ABA Banking Journal article here.

Here is a brief summary:

  • Increased Disinterest in Loans: Post-pandemic, more small businesses report no need for credit, rising from just over 50% to slightly more than 60%.
  • Historical Trends: Similar shifts occurred after the Great Recession, linked to survivorship bias and decreased risk tolerance.
  • Pandemic Impact: Unlike the Great Recession, new business formation surged post-pandemic, driven by remote work and geographic diversity.
  • Current Factors: Excess cash from government support and high interest rates reduce the need for loans, with expectations of increased borrowing when rates decrease.
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