Despite the best efforts of United States government agencies to jumpstart the national economy, not all industrial and business sectors have benefited equally. According to a report issued by the School of Business Administration at the University of Miami, the proactive quantitative easing policy adopted by the Federal Reserve Bank from 2008 until a few years ago had the unintended side effect of significantly reducing business lending.
Aside from providing bailout funds to national and regional banks to avoid the disasters of Washington Mutual, Countrywide and others, the Federal Reserve aggressively purchased mortgage backed securities in excess of $1.7 trillion. This heightened purchase activity managed to keep the real estate and mortgage markets afloat while preventing major banks such as Wells Fargo from failing, but it also had a negative impact on commercial lending.
Small Business Lending Should Not be Ignored
There is no question that the quantitative easing policy of the Federal Reserve helped to avoid economic catastrophe at a time when Americans were financially under siege by the effects of the Great Recession; however, the recovery has not been kind for small business owners in Miami and across South Florida.
In the aforementioned study, which was conducted along with economists from Virginia Tech and Wharton, researchers found that small business owners were puzzled as to why they could not secure commercial loans even with excellent credit ratings from about 2008 to 2012. One of the explanations provided by the study is that bank executives decided to allocate most of their lending activities towards mortgages; after all, the incentives and guarantees provided by the Fed Reserve were too attractive to ignore.
Researchers argue that the government should study the effects of quantitative easing more closely to avoid placing constraints on commercial lending. Even though the mortgage market is significant for the American economy, the small business sector is a major provider of relief during hard times.
The Resilience of Miami Business Owners
It took a few years for the South Florida business community to shake off the doldrums of the Great Recession. In 2011, only $154.4 million worth of commercial loans were granted to small businesses in Miami-Dade County; by 2013, that figure had climbed to $213.3. The situation is improving in 2017, but owners of small companies who are still having a hard time getting approved are finding better luck with Miami car title loans.
It may still take a couple of years before business lending gets back to normal levels in Miami. There is a lot of anticipation and hope in the Trump administration to keep the campaign promise of economic stimulus. Analysts believe that infrastructure projects and tax breaks would work wonders in 2017, but they are also cautious in their forecasts due to all the turmoil and scandals that the White House has suffered this year.
If anything, Miami business owners are known to be very resilient. Just like many of them have taken out car title loans, others are finding ways to streamline their operations and forge new partnerships; they are not business owners who will wait around for the Trump administration to jumpstart the economy. This does not mean that they will forego applying for commercial loans completely, but they will not be fazed by the low approval rates.