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Analysis Rising interest rates are causing pain for SMEs in the US and Europe


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Author: Chiara Elisei

LONDON (Reuters) – Small and medium-sized enterprise (SME) firms in the U.S. and Europe could be next to feel the rapid rate hike With rising pain, analysts and investors are wary of the impact of tightening credit conditions amid recent banking turmoil.

Unlike large corporations, which typically issue fixed-rate debt and have little exposure to short-term interest rate fluctuations, SMEs rely on direct financing from banks and can therefore feel impact in real time.

While the exposure of SMEs to higher interest rates and the possibility of default may have been largely off the radar of investors so far, Especially since the big players have held up fairly well, and some are looking for any signs of strain.

“As liquidity dries up, some seemingly idiosyncratic hiccups start to emerge,” said Macquarie Asset Management’s global head of fixed income. Brett Lewthwaite said.

Rating agency Standard & Poor’s expects the default rate to reach 3 in the US and Europe. % and 3.%, more than double the 1.6% and 1.4% in the same month last year.

SMEs are vital to economies on both sides of the Atlantic, with the European Commission estimating that they employ around

million EU population, accounting for more than half of the bloc’s economic output.

The ECB’s latest bank lending survey showed that euro zone banks reported a sharp tightening of credit standards for lending or credit lines to businesses in the fourth quarter , before this month’s bank The effects of stress.

This is the biggest change recorded in the survey since the EU

Debt crisis.

could not immediately reach the European Banking Authority (EBA) for comment.

In the U.S., the average rate at which small businesses pay bank loans has risen from around 5% to 7.6% 1000, and Jefferies analysts estimate that it may reach around 9.5% by mid-year.

Analysts pointed out that the latest survey of senior US loan officers showed a “significant tightening” of credit conditions for small and medium-sized enterprises.

“In the current deteriorating environment, big companies are beautiful, and small companies will feel the pressure from interest and energy costs, supply chain disruptions and reduce the real disposable income of households,” Generali (BIT: 400GASI) Elisa Belgacem, Senior Credit Strategist, Investments.

Distress rises

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