QE Taper Risks Spike in Global Interest Rates

Forbes Reports:

3/17/14

"...The Federal Open Market Committee (FOMC) expects the taper of the Quantitative Easing to continue. Economists expect the Federal Reserve to cut another $10 billion from its monthly asset-purchase program at its two-day monetary-policy meeting, lowering its monthly bond buys to $55 billion.

The FMOC meets Tuesday and Wednesday, and it will be the first one overseen by new Fed Chair Janet Yellen. Bond traders will focus on the commentary that accompanies the decision, which is slated to be released Wednesday afternoon. Additionally, during this meeting, the Fed will release its new economic forecasts..."

The Feds reduction in asset purchases, (primarily mortgage backed securities from banks and market makers) reduces market liquidity and cheap source of funding for banks. The goal of the Fed's QE has been to buttress the capital structure of banks to assure liquidity in credit markets. The QE program has been successful in maintaining low interest rates. This has benefited SMEs by keeping the cost of capital low and credit channels open.

Low interest rates have helped SMEs to borrow cheap money. Low interest rates have also benefited consumers by keeping borrowing rates for mortgages, car loans and credit cards low. This has stimulated market demand for SME products and services. QE has been a major market support for SMEs as the post Great Recession global economy continues to restructure. 

SME's must assess how QE tapering will affect their capital structure, business model and client purchasing power. It's critical for SME's to assess how these subtle changes in the market landscape will impact numerous aspects of the business.

Credit|Redi is a critical tool used by SME managers to determine financial health, assess business factors to improve profitability and demonstrate creditworthiness to lenders to fund business growth.

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Risk: credit risk, sme, FOMC, interest rate, cost of capital, QE, Quantitative Easing, FOMC, Fed, Federal Reserve, Great Recession, Janet Yellen, Forbes

Small Business Credit Index Improves

The Experian Moody's Analytics Small Business Credit Index has posted its forth consecutive quarterly improvement.

"The Experian/Moody’s Analytics Small Business Credit Index rose 1.2 points to 117 due to the growth of small-business credit balances. According to the Q4 2013 report, the increase marked the fourth consecutive quarter of improvement in small-business credit conditions and provided the highest index reading since data tracking began in 2011.

"Credit is flowing more freely to small businesses," said Mark Zandi, chief economist at Moody’s Analytics. "With more credit, small businesses are increasingly able to expand their operations. This means more investment and jobs, and a stronger economy."

Findings from the report indicated that the growth in credit balances was due in part to financial institutions loosening credit terms for small businesses, as well as an increase in business-to-business credit transactions."

The index is a positive indication that the economic recovery from the Great Recession continues. SME's are principle drivers of economic growth.  SMEs are the leading sector in job creation and, innovation.  Each requiring access to capital to fund business growth.  

The improvement of the credit index is a positive indicator for the continued recovery of the financial health of the SME sector.  

SME's were especially hard hit during the Great Recession.  The need for capital to fund growth and access to expanded credit facilities remain a pressing concern for the SME sector.

Credit|Redi is a critical tool used by SME's to improve financial health and demonstrate creditworthiness to lenders and capital providers.

Download Credit|Redi on Google Play here. Get Credit|Redi

Risk: credit, market, financial health