Hot Topic Tuesday – Average Interest Rate for Short-Term Loans Drop in May
June 13, 2023
Delaney Sexton
Contributing Editor
Hot Topic Tuesday – Average Interest Rate for Short-Term Loans Drop in May
“For small businesses, it is the availability of credit, and not its cost, that is important to owners. Since April 2020, the average loan rate paid by owners has risen from 4% to over 8%, but reports of inability to get all the credit desired remain low, suggesting that higher rates aren’t a major impediment at this point,” reads the NFIB’s May Small Business Economic Trends report.
Small business optimism saw minor improvements during the month of May. The Optimism Index increased by 0.4 points, and the Uncertainty Index decreased by a point. Small business owners are still concerned about future business conditions, but a recession has yet to rear its head.
Credit Conditions
- 29% of small business owners reported borrowing at least once every three months.
- Unchanged, 6% of borrowers said that their most recent loan was more difficult to obtain compared to their last loan.
- More than a quarter of respondents had all their borrowing needs satisfied, but borrower satisfaction fell by 3% in May.
- 1% of the small business owners said their borrowing needs were unsatisfied in May.
- 10% of small business owners expect credit conditions to worsen in the next three months, an increase from April.
- A slight improvement, 24% of borrowers paid higher relative interest rates in May compared to three months before.
- Down 0.7%, the average interest rate that borrowers paid on short-term loans was 7.8% in May.
- Only 4% of owners reported that financing and interest rates were the top issue for their small businesses.