According to Scott Steinberg, Chief Operating Officer and Chief Product Officer of Enigma Technologies, economic uncertainty is not only making funding harder to come by for small- to medium-sized businesses (SMBs), but also more expensive.
“Interest rates are rising all over the place, hurting the entire sector,” he remarked. “The cost of capital is rising, as is the opportunity cost of that money being invested, and as a result, small enterprises are facing significantly higher interest rates.”
Lenders are also under pressure – if not now, then in the future. Steinberg observed that there has been no discernible shift in delinquencies, at least not yet.
Small business lending happens through a variety of channels, including small business credit cards and lines of credit, term loans, merchant cash advances, and revenue-based finance. Furthermore, as Steinberg observed, overall approval percentages are beginning to fall, though not substantially. Some alternative lenders have even stopped all SMB lending attempts.
“There may be some significant changes ahead as individuals withdraw — and sadly, there will just be less financing available,” Steinberg said.