Minority Suspicion – The Banking Crisis
Small businesses are often an underappreciated part of the economy, and for structural reasons unfortunately. They are the lifeblood of the US economy, making up the incremental gains that we see in our economy when things are going well, but the large businesses often receive the largest rewards. When a downturn occurs, small businesses are disproportionately affected and are often the first to close, while large businesses end up surviving.
As the banking crisis continues to unfold, small businesses have started to be extra vigilant regarding their finances and how to keep them protected. Many startups and businesses have been placed in a dire situation with the collapse of Silicon Valley Bank, while others are now navigating the future. One of the popular methods has been to move their money from large banks to a variety of smaller banks to reduce risk, especially considering that these large regional banks are the ones that have been facing the most pressure recently. However, the uncertainty still creates a problem for small businesses because outflows are still increasing from smaller banks, reducing the amount of loans they can give to small businesses.
Others are also worried about the racially negative effects that the banking crisis can have in the system. The banking system has been historically racist in the past through methods like redlining, but issues could get worse for persons of color who are looking for a loan. Minorities have often relied on these regional banks to get funding for things like businesses because they would get turned down by large banks, and analysts now worry that the issue will get even worse due to the collapse of regional banks because of the demographics of borrowers.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.