Banks relax standards for business loans

The Federal Reserve announced this week that bank lending standards eased in the third quarter as lenders scrambled to boost small businesses and real estate investors.

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

Better lending terms would be fueled by less economic uncertainty, as well as increasing competition among lenders. All of this is good news for business owners who can now get loans with lower rates and better lines of credit.

Some businesses are already taking advantage of the improved conditions by taking out small business loans or opening lines of credit for other investments. According to the survey, medium and large companies are currently among the most frequent borrowers.

Banks are also relaxing consumer credit standards, especially for credit cards and car loans. This means that people with bad credit are more likely to get their next credit card approved because the credit score requirements are lowered.

In addition, credit limits have increased significantly so that people are able to do more with their credit than at the start of this year. That said, demand for credit cards and business loans is still lower than pre-pandemic levels.

But banks that took part in this survey are optimistic for the next six months and expect a further increase in credit card loans, as well as commercial and industrial loans.

“Looking ahead, banks expect stronger demand for C&I loans over the next six months from businesses of all sizes. The most widely cited reasons for a more solid demand outlook were higher investments in factories or equipment as well as an increase in expected customer financing needs on inventory, accounts receivable and on mergers or acquisitions. Says the report.

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