It is obvious that lending to large companies is increasing steadily across the entire world. However, as lending grows for big businesses, it only shrinks for small and medium-sized businesses as they struggle to obtain financing. A new paper from Omega Performance entitled Maximizing Results, Minimizing Risks examines the reasons for the reluctance of financiers to lend to small and medium-sized businesses and what the financial services industry needs to help this sector stay funded.
In addition to that, the paper looks at the recent history of lending, the circumstances that led to the financial crisis of 2007 and the banking industry’s current efforts to avoid those same mistakes. According to President and CEO of Omega Performance John Golden, “Because there is no useful credit risk transfer option for smaller loans, lending institutions know that they can’t trade out of a loan and instead must bear the entire risk.”
Golden added, “The temptation is for banks to steer clear of multiple, harder-to-understand small and middle market loans in favor of fewer larger, but safer, credits. This bias toward large organizations might minimize the risks for financial institutions in the near term, but it limits growth in the long term.”
The state of banking in a total of six countries is highlighted in a series of videos on banking in Australia, Canada, China, Singapore, the United Kingdom and the United States and the paper, executive summary, podcast and all videos can be accessed on Omega Performance’s website.
Omega Performance equips companies with the credit skills to source and structure high-quality, profitable loans in order to help grow a more profitable, lower-risk loan portfolio. Omega Performance has provided training to more then 2 million people in more than 2,500 financial services organizations around the world since 1976.
Source: The Sacramento Bee – Small Business Lending Still Sluggish on Global Level