United States and Europe small and medium-sized enterprises (SMEs) might as well next to feel pain of Quick attention rate Rises, with Analysts and investors are watching cautiously for the influence of Tighter credit conditions have been exacerbated by recent banking turmoil.
Unlike the big companies that usually issue fixed-rate debt They have little short-term exposure rate The fluctuations of small and medium enterprises depend on direct bank financing, so it is effect feel in real-time.
and during exposure of Small and medium-sized companies higher rates and potential for The default may have gone too far under the investor’s radar so far, especially since it has been caught by the big companies up Somewhat well, others on On the lookout for no signs of I can’t.
“As liquidity drains, it seems like Special small issues start For pop music, Brett Lewthwaite said, global head of fixed Income at Macquarie Asset Management.
Rating agency S&P expects default rates in the United States and Europe to reach 3.75% and 3.25%, respectively, by September, more from double 1.6% and 1.4% in the same month last year.
Small and medium-sized companies critical for economies on Both sides of Atlantic Ocean, with The European Commission estimates that they employ around 100 million people in European Union and the account for more from half of economic output of the bloc.
European Central Bank latest Bank lending survey shows euro area Banks reported significant tightening of credit standards for Business loans or lines of credit in the fourth quarter of The year is 2022, before impact of This month bank pressure.
This was the largest change recorded by the survey since 2011 debt calamity.
European Banking Authority (EBA) was not immediately available for comment.
average in the United States rate that small Companies pay on bank Loans increased from about 5% to 7.6% in 2022, and it is likely that hit About 9.5% by midyear, Jefferies analysts estimate.
Analysts note that latest A US chief loan officer survey indicated “significantly tighter” credit conditions. for Small and medium-sized companies.
“In the current environmental degradation big Small businesses will feel the most pressure from benefits, energy costs, disrupted supply chains, and reduced energy costs real Disposable income from households,” General Investments said. senior Credit Strategist Elissa Belkacem.
The iTraxx Europe Crossover Index measures cost of Basket Exposure Insurance of waste-rated Corporate bonds, which have been up lately but are doing well below Peaks seen during the COVID crisis.
Jay Miller, President market A strategist at Zurich Insurance Group, he even said that with sharp rate Rising, was the focus of the investor on Existing companies in good shape And good to handle higher borrowing costs.
But when you think of All small and medium-sized companies in Europe and the United States adopting on bank Finance, Revolvers (Type of bank attached), and even more often on Finance owner, finance has become a major issue,” He said.
British small and medium businesses, affected by weak growthand double- Inflated number and rising Bank of England’s rates, however, are considered particularly weak.
Corporate distress levels in the UK have accelerated in the quarter to february them highest Since June 2020, the index has been compiled by the law firm Weil Gotshal & Manges shows.
Another survey by Manx Financial Group showed that 22% of UK SMEs that need external financing over the last Two years they could not get it access because of higher cost of Financing and equipment timesand lack of Flexibility.
While many small and medium-sized businesses have closed, said the CEO of Manx Financial Group, Douglas Grant in rates for a fixed period, to further reduce exposure rate increases, others do not.
Small businesses count on today rise in Al-Qaeda rate To be a peak, like a bank of England expects a much steeper fall than expected in Inflation, even after the unexpected rise We saw it earlier this week.
In response to the latest Bank of England issue rate Union increase of Martin McTough, National President for Small Businesses (FSB), said, “Inflation is taking a huge toll on small companies who Rather, she more exposed to escalating input costs from large firms.”
“The government has to prove it on the side of small Business who They feel stressed and under a lot of marginal pressure,” Mac-Tagged added.
Meanwhile, the rate of small business Loan approval in big US banks fell in February for nine consecutive months and business Loan approvals in small Banks have also fell, he said online Funding platform for small Business Biz2Credit.
Small US banks experienced an exodus of $119 billion in Final weeks as depositors took Fear after a breakdown of Silicon Valley Bank.
Rohit Arora, CEO of Biz2Credit, said he expects it will now become more difficult for small capital insurance companies, with the biggest challenge These rates remain higher for sometimes.
“While it is unlikely that these rates will come down before next yearat least business owners will know This is the maximum Arora said.
However, as financing costs jump And it becomes hard accessthe risk of a spike in Analysts said default rates are becoming increasingly tangible.
“Weak hands are starting to show,” said Lewthwaite of Macquarie.