Low interest rates could help small businesses

Low interest rates could help small businesses

In the aftermath of the 1990 and 2001 recessions, small businesses expanded their payrolls more than any other type of firm. Now, as the nation moves toward economic recovery, economists look to small businesses to generate new jobs once again.

Unfortunately, SMB expansion and new hires may be hindered by the tight credit climate. Federal Reserve chairman Ben S. Bernake is committed to creating a climate that favors business incorporation by increasing entrepreneurs’ access to the lending market.

According to BusinessWeek, Bernake is concerned about the decrease in commercial and industrial loans in the last quarter. In March, these loans hit their lowest point in two years. Moreover, Fed statistics show there has been a substantial drop in revolving debt, primarily used by small companies.

But good news may be on the way for those looking to expand or start a corporation. Bernake told the source he understands the economy may have passed its lowest point, but “we are far from being out of the woods.” As such, the Fed is pushing measures to continue low interest rates on loans.

This may be vital to the small business community and the overall economy. According to the Small Business Administration, SMBs have created nearly two-thirds of net new jobs over the past 15 years.