The Impact of COVID-19 on Small Business Financing

The COVID-19 pandemic significantly impacted American small businesses, causing a substantial decline in active business owners and a sharp reduction in revenue, affecting various sectors and regions. As a result, the Small Business Financing landscape experienced significant changes. Many surviving businesses sought financial assistance, leading to a surge in loan applications in the spring of 2020, while overall demand for new credit decreased throughout the year.

The Small Business Lending Index from PayNet indicated a subsequent rebound in Small Business Lending. The volume of new commercial loans and leases to small businesses increased during 2021 and 2022, surpassing pre-pandemic levels.
 

While demand for credit among young and small businesses shows signs of recovery, the supply side of credit is only gradually returning to pre-pandemic levels across different types of lenders. Indicators like the Biz2Credit, Small Business Lending Index, and bank lending standards suggest a slow recovery in credit, with levels still lower than those before the pandemic.
 

Moreover, delinquencies, defaults, and charge-offs among small businesses have seen slight increases in 2022, signaling potential future challenges. Policymakers are advised to closely monitor various indicators in the small business finance sector to identify necessary actions to maintain credit accessibility and address emerging challenges effectively.
 

With an uncertain economic environment on the horizon, one of the best ways to prepare is to secure financial stability. Business funding was a key factor in returning America’s economy to how it was before Covid-19. Contact us to find out if additional cash flow is beneficial for your business.