by James C. Sherlock
In general, I do not write enough about Virginia small businesses.
Small business is both the heart and soul of the Virginia economy.
I have no personal financial interest in Virginia’s community banks, but all of us need them to be healthy.
Because community banks disproportionately fund small business.
The Federal Reserve reported in its 2023 Report on Employer Firms: Findings from the 2022 Small Business Credit Survey
As pandemic-related funding programs ended, the data show an accompanying rise in the share of firms that sought traditional financing in the form of loans, lines of credit, or merchant cash advances. The share of these applicants that were fully approved rose year-over-year but lags prepandemic levels.
But the banking industry, trying to reestablish itself as the economy’s primary funding agent after the COVID federal money tsunami receded, is under stress not seen in 2022.
The Fed’s rapid rise in interest rates to combat inflation, driven by federal spending, has lowered the value of banks’ fixed rate collateral.
Community banks, not the source of the problem, are bearing the brunt of the reaction.
Depositors need to understand how important Virginia’s 42 community banks are to Virginia’s economy — and many of their own jobs. Continue reading