Easing lending standards may be emerging as a measurable trend, according to a Federal Reserve financial institution survey. For the very first time in 3 years, getting a new credit card is easier. Banks are offering more liberal lending standards to small businesses than they have in four years. Tight small business lending has been a heavy weight on the United States of America economy as it fights to climb out of the last recession. Some experts say despite the good news, loosening lending standards will do little to help until demand for small company credit returns.
Credit card lending standards loosen
The Federal Reserve bank survey questions bankers about the status of supply and demand for commercial and consumer credit in the preceding quarter. Reporting on the Fed survey, Creditcards.com said about 8 percent of banks had relaxed credit card lending standards for application approval. No banks said their credit card lending standards had tightened further. The numbers put an end, temporarily at least, an 11-quarter run of credit tightening that dates back to 2007. At the very same time, the Fed survey shows that credit remains limited and costly for most existing cardholders.
Small business credit vs. demand
The Fed’s latest band survey found that small business lending standards may be loosening for the first time since just before the recession hit. NPR reports that the Fed said it was the first time it had found relaxed lending standards for small company since late 2006. Shortly before the survey was released the Fed conducted a conference with banks on how to stimulate small business lending. The conference put the spotlight on the major gap between big corporations piling up money reserves as smaller businesses failed to qualify for lines of credit. However, in the survey most banks were still reporting lackluster small company loan demand.
Small business outlook remains dim
Since the recession hit it has been noted that numerous small business owners have complained that they were having more trouble borrowing money to stay open. Nevertheless, Seeking Alpha reports that despite the fact that small business lending standards easing, the negative outlook of small business owners remains a drag on demand for commercial loans. Small company owners are more pessimistic about the economy now than at any time since 2005, according to the NIFB Small company Economic Trends report. A mere 6 percent believe now is the time to resume expanding. Within the next two quarters, just 19 percent are preparing to make a capital purchase. Expectations for expansion of inventory, job creation and sales continue at low levels.
Additional reading
CreditCards
creditcards.com
NPR
npr.org
Seeking Alpha
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