JPMorgan COO Pinto: Private Credit Small Business Lending Needs Monitoring
J.P. Morgan Chase President and Chief Operating Officer Daniel Pinto is calling for more focus on relationships between small businesses and private credit providers.
Pinto said in an interview Wednesday (Jan. 22) with Bloomberg Television that private credit’s funding of the sector requires attention as the industry has yet to suffer blowback from an economic downturn.
“There is a lot of direct lending going into the smaller side of middle markets,” he said at the World Economic Forum in Davos. “How these funds are going to behave in a downturn with small businesses is something you want to be concerned about…”
The private credit industry is in the middle of a boom. The market for private lending was estimated at $2 trillion last fall. It offers a capital lifeline for a range of “especially smaller firms that may have been, or still are, underserved as they seek capital from traditional channels,” PYMNTS reported in October.
Pinto said in the interview that although the private credit industry slowed when the pandemic began, robust government guarantees during those years meant that it hasn’t truly been tested.
The growth of the private credit sector has also caused concern among regulators about potential threats to the financial system, per the Bloomberg report. Banks, meanwhile, are wondering how to deal with this industry.
“Banks, we’ve been lending for 200 years,” Pinto said in the interview. “We are in an amazing position to compete because we have relationships with all those clients, and we offer to them not just the loan, we offer to them a bunch of activities.”
Meanwhile, PYMNTS wrote last week that the small- to medium-sized business (SMB) market shows “vast” potential. More than 33 million SMBs operate in the United States, according to U.S. Chamber of Commerce estimates. They employ nearly half of the overall workforce.
PYMNTS Intelligence found that most SMBs must grapple with delayed payments and about 60% struggle with cash flow. Loans and other credit products, such as virtual cards and expense management solutions, can prove useful when helping SMBs survive.
It was reported last week that Pinto is retiring after 40 years at J.P. Morgan Chase. He will will relinquish his role June 30 to Jennifer Piepszak, co-CEO of commercial and investment banking, and then retire next year.
For all PYMNTS B2B coverage, subscribe to the daily B2B Newsletter.
The post JPMorgan COO Pinto: Private Credit Small Business Lending Needs Monitoring appeared first on PYMNTS.com.