Risk with graphs on chalkboard Source: Shutterstock

For businesses, the last few years have been anything but business as usual. Between the COVID-19 pandemic and other ongoing challenges, such as inflation and supply chain issues, small businesses have had no shortage of economic concerns to navigate. All these factors will influence how credit unions monitor and manage portfolio risk for small business loans.

Credit unions should also recognize that some of the economic impacts of the pandemic will become more evident over the next two years. For instance, many small businesses would have eventually shuttered, even without the pandemic, but they managed to stay afloat by securing relief funding, like Paycheck Protection Program (PPP) and COVID-19 impact loans. Nearly one in five businesses fail within their first year and failure rates go up over time, as nearly half of all businesses shut down after five years, according to Bureau of Labor statistics. Now that repayments are required for the relief funds, some struggling businesses may default on these loans.

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