August 19, 2019
By Mary Miller
Contributing Editor, Main Street Monday
Main Street Monday – Federal Survey Reports Loan Standards Ease for Small Businesses
According to a Reuters report published on August 5, a survey comprised of bank officers indicated loan standards on commercial and industrial (C&I) loans for large and mid-sized businesses during Q2 2019 stayed the same, while they were eased on smaller businesses.
However, a survey of senior loan officers conducted by the U.S. Federal Reserve showed an ease of loan standards for all businesses applying for these types of loans as compared to the pre-financial crisis reporting period.
To quote the U.S. Federal Reserve report, “Banks, on balance, reported that their lending standards on C&I loans are currently at the easier end of the range of standards between 2005 and the present.”
The concern for the U.S. Central Bank is whether the rise in U.S. business debt to all time high levels will ultimately affect the stability of financial markets.
If the trend of rising business debt continues, it could result in problems for the economy. However, according to Federal Chairman Jerome Powell, “The danger from corporate debt isn’t as bad as the subprime mortgage threat was.”
The Federal survey also indicated that the demand for commercial loans didn’t increase in Q2 2019, while smaller businesses reflected an overall weaker demand.
Historical stats for commercial, subprime credit card, auto and real estate lending loan trends show that standards have been tightened as compared to those in place from approximately 2005 to today.