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Banks Ease Small Business Lending Standards

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Banks have eased lending standards for small businesses for the first time in nearly four years, the Federal Reserve said Monday.

| August 17, 2010

Banks have eased lending standards for small businesses for the first time in nearly four years, the Federal Reserve said Monday. Separately, financial firms said consumers continue to better manage their credit card payments, with fewer customers defaulting or making late payments.

In its new survey of bank lending practices, the Fed found that the loosening of loan standards was occurring primarily at the country's largest domestic banks.

Banks had been reporting relaxed credit standards for big corporations. But the new survey marked the first indication that credit was beginning to ease for smaller companies.

That could be welcome news for small businesses. Many have complained since the recession hit that they were having more trouble borrowing money to keep operating.

The Fed said it was the first time it had found relaxed lending standards being imposed on small businesses since late 2006. The Fed defined small firms as those with annual sales of less than $50 million.

The Fed's latest quarterly report on lending was based on responses received to a survey done in late July. It found that the most improvement came in loan areas where banks were facing competition to offer credit. The survey found that the easing of standards was concentrated at large domestic banks. Most banks were still reporting lackluster demand for credit.

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Source: NPR



 

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