In the complex web of economic dynamics, small businesses often find themselves at the mercy of various challenges. One such challenge, which has been a recurring nightmare for many, is the issue of late payments. A recent article by the FSB discusses this in a little length.
The article underscores the FSB National Chair’s concern regarding looming threats that small firms’ financing options suffer with. This factor is a crucial support mechanism for small businesses, allowing lenders to hold lower capital levels to counterbalance SMEs’ loans. However, if this lifeline is abolished, small businesses could face dire consequences.
Removing the SME Supporting Factor could exacerbate the already challenging landscape for small businesses. With banks potentially facing higher capital requirements for lending to SMEs, they may become more hesitant to extend credit to these enterprises. This reluctance could stem from banks’ concerns about the increased risk associated with lending to small businesses without the cushion provided by the SME Supporting Factor.
The FSB National Chair rightly points out that eliminating this factor could lead to reduced overall availability of finance and a surge in lending rates. Such a scenario could be catastrophic for small businesses already grappling with cash flow issues and limited access to affordable credit.
The repercussions of this decision could be far-reaching, and there are firms offering loans with little underwriting and higher interest rates with a lack of onboarding to go with them. If you are stuck in your Personal Guarantee and require more help, don’t hesitate to reach out for support. Book a 30-minute no-obligation call today.