Banks Ease Standards for Business Loans

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ByG. Dautovic
November 12, 2021

The Federal Reserve reported this week that bank lending standards eased in the third quarter as lenders worked to drum up small businesses and real estate investors. 

A Federal Reserve survey involving 80 domestic banks and 24 US branches and agencies of foreign banks tells a story of a continuing economic recovery as the country emerges from another wave of COVID-19 infections.

The better loan terms are said to be fueled by a decline in economic uncertainty, as well as growing competition among lenders. All this is good news for business owners who can now get loans with lower rates and better credit lines.  

Some businesses are already taking advantage of the improved terms by either taking out small business loans or opening up credit lines for further investment. According to the survey, mid-sized and larger companies are among the most frequent borrowers right now.

Banks are also easing standards for consumer credit, especially for credit cards and auto loans. That means people with bad credit are more likely to get their next credit card approved as credit score requirements are lowered.

Additionally, credit limits have seen a significant increase, so people are able to do more with their credit than earlier this year. That said, demand for both credit card and business loans is still below pre-pandemic levels. 

But the banks that participated in this survey are optimistic about the coming six months and expect a further increase in credit card loans, as well as commercial and industrial.

“Looking ahead, banks expect stronger demand for C&I loans during the next six months from firms of all sizes. The most widely cited reasons for a stronger outlook for demand were higher investment in plant or equipment as well as an increase in expected customer financing needs on inventories, accounts receivable and on mergers or acquisitions,” the report reads.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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