Atlanta Fed, Report: Credit Conditions Are Tightening. Are Firms Feeling the Pinch?

“Our results suggest that any significant tightening in credit conditions that has occurred in the wake of recent bank failures may take some time to impact the broad swath of Main Street businesses, as just 25 percent of firms in the SBU anticipate seeking credit financing during the next 12 months. And the majority of firms not seeking credit financing report having enough cash on hand to cover their plans during the next year. Indeed, although the SLOOS indicates that, on balance, the share of banks tightening credit has increased markedly, only a very small fraction of banks have tightened lending standards “considerably.” To be clear, a significant and protracted contraction in the supply of credit would certainly constrain firms’ ability to sustain and grow their businesses. However, our results do suggest that firms’ demand for credit is expected to wane relative to the year prior and many firms report having ample cash on hand to move forward on business plans, perhaps splashing a bit of cold water on near-term fears of a looming credit crunch.”