Banks relax standards for business loans

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

A Federal Reserve investigation involving 80 domestic banks and 24 U.S. branches and agencies of foreign banks tells the story of continued 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 growing competition between lenders. All of this is good news for business owners who can now get loans at lower rates and better lines of credit.

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

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

Plus, credit limits have seen a significant increase, so people can do more with their credit than they did at the start of this year. That said, demand for credit card and business loans is still below pre-pandemic levels.

But the 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.

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

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