Business Lending Standards Ease In Second Quarter

Aug 15th, 2011 @ 3:59 AM by Debbie Dragon

A recent Federal Reserve survey shows that lending for some businesses throughout the country got easier during the second quarter. In a time when lending has been difficult to come by for many businesses seeking credit this is good news.

The survey which was conducted by the Federal Reserve received responses from 55 domestic banks during the time frame of July 12^th through July 26^th. Of the banks surveyed 20% of them confirmed that they had eased lending standards to large and middle size businesses mainly for those that had applied for industrial and commercial loans. The same survey also showed that 10% of domestic banks also reported easing lending standards for small businesses.

Competition seems to be front and center for the ease of some standards when it comes to business lending. Banks are stepping up the competition as they look for credit worthy businesses to lend money to.

The increase in lending may also be contributed to an increase in demand for loans. Banks also reported an increase in demand from medium and large businesses looking for lending. Small business demand according to survey results remained stagnant.

While business lending did pick up in the second quarter, other areas of lending remained pretty much the same from the previous quarter. The same survey also looked at real estate and consumer lending and found that there was little change in either area. There was a slight increase in demand for both automobile loans and credit card applications.

The real estate market has been stagnant for some time due in part to increased lending standards. Many potential home buyers are simply not credit worthy and additionally, many credit worthy borrowers are still weary of home prices and whether or not purchasing a home would actually be a good investment.

The question now is whether or not the recent ease in lending standards will continue. Some are not so sure with the current debt crisis in the country and with the US having their credit rating downgraded.

According to an article on bloomberg.com Mark Vitner, the senior economist from Wells Fargo believes that lending will remain consistent through the remainder of the year. “We’re going to see credit standards stay about the same in the next few months given the increased volatility in financial markets and increased uncertainty about where the economy is heading.”