Small business owners continue to struggle in the U.S. economy due to factors outside of their control, but they're still holding out hope that 2024 will be a strong year, according to new figures released by the Federal Reserve.
The Federal Reserve said in its latest “Beige Book” survey that economic activity has expanded since the start of the year, with eight of the 12 federal districts experiencing slight to moderate growth. Business sectors such as retail, hospitality and food services saw some cooling in January and February, but overall the U.S. remains on track for a relatively swift economic recovery from the COVID-19 pandemic.
That said, some economic challenges remain, especially for small business owners. Access to credit remains tight since the collapse of several banks with close ties to the startup sector in February and March of last year. While concerns about a broader banking crisis have largely subsided in the months since, the Beige Book report noted that “bankers reported that lending standards have tightened, particularly for business and commercial loans.”
The report published by Reuters supports the idea that lenders are becoming more cautious towards business owners, especially small and medium-sized enterprise loan seekers. Six entrepreneurs contacted by the media platform said they struggled to get loans in 2024, with one of them claiming he had been looking for financing since March of last year.
Interest rates are another big factor cooling lending conditions, with banks adopting a more cautious stance following the bank failures in 2023. “Banks and corporate clients agreed that rising interest rates have reduced demand for loans and that tighter access to credit has reduced potential supply,” the Fed said in a report.
However, despite the credit problems facing small business owners, many still believe that 2024 will be a strong year for the U.S. economy. The only sector with a pessimistic outlook in the Fed's Beige Book report was the commercial real estate industry. Prices, demand, labor shortages, and other key areas are gradually improving and are expected to continue moving in the same direction. This should immediately ease entrepreneurs' worries and lead to success later in the year.
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