Credit Tight for Rural America

June 24, 2009 07:00 PM

Rachel Duff
, Farm Journal Intern

Three Facts about the credit crisis: 
The credit is tight because of the global recession and the financial crisis.
The government, private and public partnerships have started programs to help.
Business owners need to have the tools to watch the credit crisis.
Because of the global recession and credit crisis, lenders have a risky environment and business owners have less demand for their products. That means credit is tight, especially for rural America, says Brian Briggeman, economist for the Federal Reserve Bank of Kansas City, Omaha branch. 

The bottom line of the credit situation is that the banks aren't lending to each other because of the recession and financial crisis. Therefore, they really aren't lending to business owners. The risk is considered too high, Briggeman says.

There are programs out there that can help the situation, he says.

Places to look for help:
Farm Service Agency (FSA) 
Small Business Administration (SBA)
American Recovery and Reinvestment Act (ARRA) , recently created by Congress
• New public and private partnerships

To stimulate small business lending, Congress delegated money to these programs to lower the fees that borrowers pay for loans and to increase government guarantees on loans, Briggeman says. There are also new public and private partnerships that are being started to help credit access for rural America.

To keep up with the credit crisis, business owners should refer to the Federal Reserve surveys and the TED spread, which is a daily credit indicator, Briggeman says. The TED spread can signal when the trend is going to change. It is calculated by the bank-to-bank lending rates minus the Treasury bill rate. That equals the risk for the bank to lend money. If the number is close to zero, it is a riskless loan. The bigger the number, the larger the risk for the banks, Briggeman says.

Though credit is still elevated, he says, it has dropped some as of late. But, the future is still unknown. Credit remains tight, and it will continue to remain tight until the recession and financial crises lift.

For now, Briggeman says business owners should:
• Watch spending
• Make prudent choices
• Pay attention to the credit environment
• Use the resources that help with the credit crunch

For More Information
Monitoring Credit Conditions in Rural America

You can e-mail Rachel Duff at

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