The shockwaves triggered by the collapse of Silicon Valley Bank (SVB) and the more recent failure of First Republic Bank are rippling through the U.S. economy. Rising interest rates were already making it more difficult for small businesses to access capital for investment and operational needs. The rapid spike in rates has contributed to a 13 percent decrease in small business applicants being approved for at least some of the loans, lines of credit, and cash advances for which they applied. Now, the threat of intrusive regulation in response to internal negligence at the two banks, which regulators ignored even though they had the tools and authority to take action, could make matters worse.
Not surprisingly, according to our new Small Business Checkup Survey conducted by Technometrica, 60 percent of small business owners report that rising interest rates are having a negative impact on their business and 44 percent say that a “credit crunch” is doing the same. Misguided regulatory punishment aimed at small to mid-size banks would only serve to exacerbate small business woes, and in turn harm the broader economy.
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