Companies were able to pay off some debts during the pandemic – this is one of the findings of a new S&P Global Market Intelligence report. And that might tell us something about where this economy is heading.

In March, when the pandemic began to panic everyone, companies went to their banks and used their existing lines of credit.

Karen Petrou, managing partner of Federal Financial Analytics, said companies were accumulating money.

“Businesses took out every penny of cash they could take out of their banks just in case,” she said.

It was during the first trimester. In the second, some businesses began to receive government assistance – paycheck protection program loans.

Nate Tobik, CEO of CompleteBankData, said that at this point, non-PPP loans were starting to seem unnecessary for many companies.

“They didn’t need the lines of credit that they drew, so they paid them back,” he said.

This is not necessarily a good sign for economic growth. Normally, businesses use bank loans to expand – maybe start a new project or build a new office.

But now?

“A lot of business plans are just frozen because no one really knows what’s going to happen with the demand for retail, hotels, travel,” Tobik said.

Instead, companies are paying back their loans and focusing on their existing businesses.

Kent Belasco, who heads the commercial banking program at Marquette University, said the thinking is, “If my business is pretty much closed, there’s not much I can do except to make sure I can. get my employees back and have a business in the future.

He said the decline in lending is also an indicator of what banks think about the future.

Rather than issuing new loans, he said banks have increased their reserves in case their existing loans go badly.

“They are looking to the future, and they are a little worried, because I think they are anticipating the losses that are going to result,” Belasco said.

The big banks have enough capital to absorb the losses, he said. But small banks could have problems.

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