Business Lending Standards Loosen In Q4 2017

The Federal Reserve revealed in its quarterly survey on Monday (Feb. 5) that loan officers in banks around the U.S. eased lending standards for businesses but tightened lending standards when it came to commercial real estate loans.

According to news from Reuters, the loan officers that took part in the Federal Reserve’s quarterly survey said demand for business loans has stayed the same in the fourth quarter, although fewer clients applied for commercial real estate loans in the last three-month period of the year.

“A moderate net percentage of banks reported they eased standards for (business) loans to large and middle-market firms over the past three months while lending standards remained basically unchanged … for loans to small firms,” the U.S. central bank said in its survey, according to Reuters.

The newswire noted the Federal Reserve expects to raise interest rates three times this year. Financial conditions usually constrict as rates go higher, but so far they’ve remained neutral. U.S. financial institutions also told the Federal Reserve they saw less demand for auto loans and home mortgages. 

At the same time loan officers are reporting easing lending standards for businesses, recent data from small business credit analysis firm PayNet finds the small and medium-sized business (SMB) lending landscape expanded significantly toward the end of 2017.

PayNet announced its latest “U.S. Small Business Credit Monthly Report” on Jan. 9, which showed its Thomson Reuters/PayNet “Small Business Lending Index” rose by 4.1 percent for the month of November. The index is now 7 percent higher than it was one year prior, PayNet noted.

“After lagging for most of the year, small business investment is finally starting to pick up,” said William Phelan, PayNet president, in a statement. “Financial health remains solid, and small businesses are well-positioned to expand through responsible borrowing.”


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