A Federal Reserve financial institution survey has found that lending standards are showing signs of loosening. Getting approval for a new charge card is more likely now than it’s been in the last 3 years. For the first time in four years, banks have loosened lending standards for small businesses. Lack of small company credit has been identified as a major problem as the United States economy struggles to recover from a lingering recession. However, until demand for small business loans resumes, some experts say that more liberal lending standards will do little to ease the pain. Post resource – Fed survey shows lending standards easing for first time in years by Personal Money Store.
Lending standards for revolving credit ease
On a quarterly basis, the Federal Reserve financial institution survey queries financial institution executives about the previous quarter’s availability of credit and subsequent demand. Reporting on the Fed survey, Creditcards.com said about 8 percent of banks had relaxed charge card lending standards for application approval. Of all the banks surveyed, none had tightened credit card lending standards any 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.
Spurring demand for small company lending
The Fed’s latest band survey found that small company lending standards may be loosening for the first time since just before the recession hit. NPR’s Fed survey report said that loosening lending standards have emerged for the first time since late in 2006. The survey was released shortly after a Fed conference on the small business lending problem in mid-July. Federal Reserve Chairman Ben Bernanke noted a severe gap between large corporations building up cash and reporting strong earnings and thousands of smaller businesses struggling to get credit. Even so, demand for small business loans remains weak, as outlined by the banks surveyed.
A dim outlook for smaller businesses
It’s been documented that small business owners have complained about the lack of credit since the recession hit. Yet according to Seeking Alpha, demand will continue to be weak because of a negative outlook for small business owners. Smaller businesses owners are less optimistic than nearly any point within the past five years as outlined by data from the NIFB Small business Economic Trends report. Only 6 percent feel it is a good time to expand. Only 19 percent plan for making a capital purchase within the next one to two quarters. Also, plans to expand inventory, hiring and sales expectations remain at low levels.
Further reading
CreditCards
creditcards.com
NPR
npr.org
Seeking Alpha
seekingalpha.com
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