Rush Street Capital recently conducted a conversational market survey with roughly forty Middle Market and Lower Middle Market non-bank asset-based finance companies to assess the various aspects of product offerings, 2020 performance, and overall outlook for 2021.
Labor Day weekend 2020 came with continued difficulties for small and medium-sized businesses throughout the country. Due primarily to tremendous inconsistencies in lockdown policies across various states and municipalities, businesses are facing continued uncertainty and additional costs, as well as stifled ability for customers to access the products and services that those same businesses are trying to provide and have provided for years. To a large degree, these products and services are important and consumer demand for them is high, whether or not they meet the arbitrary standard of being “essential”, as determined by a local or state government official.
Now a good four months into the “Coronavirus Economy” the Fed has made it its mission to avoid prior recession pitfalls by creating a middle-market credit program (aka the Main Street Lending Program) to encourage lending for small businesses. The Fed’s attempt to provide liquidity to the middle-market is noble; responding to criticism for the Federal Government to provide more equitable solutions to small businesses hammered by economic stress. This idealism is met with the harsh realities that middle-market lending does not operate like the large corporate and government credit markets.
The PayNet Small Business Lending Index (SBLI) displays the precipitous and continued drop in lending activity in the lower-middle and middle market. The SBLI measures the volume of small business loans issued over the past 30 days and is based on the most recent data from the largest commercial and industrial lenders in its database.
It’s over. We think we can finally call the end of the game. It has been one heckuva run, but we think that the end has come for the World’s Great Debt Bubble. It has fueled some truly unbelievable economic scenarios, but the day of reckoning appears to finally be upon us. This is the beginning of a new chapter that will be focused on lower leverage, debt restructuring, more conservatism and possibly even some austerity. Even if the balance sheet of the Federal Reserve Bank and the U.S. Treasury are limitless – a theory which they appear to be attempting to prove with each passing day – the rest of us are left to accept the fact that we are going to have to live with more prudence and less availability to debt.
