"US small business lending holding up despite higher cost of credit"

July 13 (Reuters) - U.S. small businesses are paying the most for loans in 16 years as borrowing costs have skyrocketed under the Federal Reserve's aggressive interest rate hikes, but new data shows they have yet to face a widely predicted credit crunch.

The average rate paid on short-term loans for small businesses shot up to 9.2% in June, up 1.4 percentage points from May's reading - marking the largest increase in short-term borrowing costs since December 2006, according to data this week from the National Federation of Independent Business (NFIB).

The surging cost of borrowing is by design: In the ongoing effort to reduce demand and curb inflation, the U.S. central bank has tried to tighten credit conditions with 500 basis points worth of rate hikes since March 2022. But the recent improvement in the inflation outlook has meant that the highly anticipated clampdown on credit for the small business sector has yet to materialize in earnest.

Twenty-eight percent of firms surveyed by the NFIB borrowed on a regular basis in June - down from a three-year high in April but broadly in the same range of borrowing activity that prevailed in the years leading up to the coronavirus pandemic.