Fed Reports Banks Ease Lending

Today the Federal Reserve reported between April and July banks eased lending standards and terms to small businesses. This means the beginning signs of loosening up the tightening that occurred over the past few years.

This is actually the first time the Federal Reserve has seen an easing of standards on loans to small businesses since late 2006. The banks pointed to increased competition in the market for loans as oneof te important factor behind this recent easing of terms and standards.

The demand for loans has not changed significantly since the last time the Federal Reserve conducted a survey in April.

Furthermore, domestic banks also stopped reducing the size of existing credit lines for commercial and industrial firms. It is the first time banks have not cut such lines since these questions were added to the Federal Reserve survey in January 2009.

Easing lending standards because they are facing more aggressive competition from other lenders. According to the banks, small businesses have shifted their borrowing back to their banks from other sources such as credit.

Small businesses are reporting increased financing needs for inventory and receivables – which makes them prime candidates for factoring, rather than borrowing from banks. Invoice factoring provides cash to businesses within 24 to 48 hours, as long as they have already set up an account.

5 thoughts on “Fed Reports Banks Ease Lending

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