Small businesses appear to be basking in the afterglow of President Donald Trump’s upset victory in the 2016 election, with surveys showing they’re bullish about his proposed tax cuts and health care changes.
But USA Today reports optimism isn’t translating into a rise in small business borrowing.
Various indicators show U.S. companies—particularly small firms—have been taking out fewer loans in recent months, a sign they’re spending less on new equipment and structures. And that can crimp economic growth and hiring.
Experts cite a variety of reasons, including uncertainty over Trump’s agenda getting through Congress amid probes into his ties with Russia.
“Businesses are just wanting clarity before putting these investments to work,” says Stephen Caprio, U.S. credit strategist for UBS.
Some economists downplay the drop in lending, attributing it to an earlier decline in investment, especially among energy companies. But Caprio says energy firms represented just a small slice of the market.
In the first quarter, loans to nonfinancial U.S. businesses rose about 3% from a year earlier, compared with 10% annual growth in the first half of 2016, UBS figures show.
Small businesses appear to be more cautious than their larger competitors. Bond issuance—effectively a loan funded by financial markets—by larger companies increased 2% in the January-March period from the fourth quarter while loans by small firms edged up just 0.3%, according to UBS.
