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Written by Michael S. Darby
(Reuters) – Small and medium-sized businesses have rebounded last year from the blow from the pandemic, even as they faced financial challenges from rising interest rates and continued difficulty in finding workers, according to a report released on Thursday by 12 regional Federal Reserve Banks. He continued to recover. .
According to the latest Small Business Credit Survey, “the vast majority of businesses have seen rising interest rates impact on their business in some way, often in the form of increased debt repayments.” “Companies are experiencing the challenge of increased costs and payments,” it added. Operating expenses for one year until the start of the investigation. ”
The report, released by the Cleveland Fed, is based on a survey of more than 6,000 companies with fewer than 500 employees between September and November of last year. The scope of the survey captured business sentiment in the wake of a very aggressive central bank interest rate hike campaign aimed at curbing inflation.
As a result of these measures, the central bank’s target interest rate range was raised from near zero in spring 2022 to the current setting of 5.25-5.5% when it hikes in July. With inflation pressures easing, the Fed is almost certain to complete its rate hikes, aiming to do so by the end of the year, but it’s unclear when they’ll start and how far they’ll go.
This outlook suggests that some of the financial and inflationary pressures small businesses faced last year will likely ease over time. The report notes that “companies were more optimistic before the pandemic, but were much more likely to expect revenues and employment to increase next year than decline.”
The report found that nearly all responding businesses faced financial challenges in the past year, with the most common problems related to rising costs of goods and services and rising wages. However, about 77% of companies say rising costs are an issue, down from 81% of companies who said the same in 2022.
When it comes to debt, the report says the proportion of small and medium-sized businesses with outstanding debt remained flat last year, while those that borrowed had more debt to manage. According to the report, 39% of companies had debt outstanding of more than $100,000, up from 31% of similar companies in 2019.
The report also said 34% of respondents said they were having difficulty servicing debt, and 54% of businesses linked rising interest rates to higher debt costs.
(Reporting by Michael S. Darby; Editing by Chizu Nomiyama)
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