According to the latest Federal Reserve figures released on January 30, 2012 (in the January 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices), loan demand from small businesses in the U.S. is at its highest level since 2005. This uptick results directly from a growing number of the nation’s banks seeing a spike in demand for small business loans toward the end of 2011. In fact, the Fed’s polling demonstrated that 26.4% of banks experienced a moderately stronger demand for small business loans (from firms with annual revenues of $50 million or less) for the fourth quarter, compared to 21.2% for the first quarter, 17.3% for the second, and 8.3% for the third.
However, as the report points out, lenders have remained tight on credit standards, keeping loan terms relatively the same throughout this period, although there has been an easing in both pricing and terms of the loans. Along these same lines, for most banks caps on credit lines and requirements for collateral remained the same as well. Essentially, what this means is that for many small businesses in America, securing a loan can still be quite difficult.
In fact, business experts suggest that these numbers may be meaningless, as most small businesses earn a yearly revenue of $1 million or less (compared to the Fed’s $50 million per year cut-off). This discrepancy in annual revenue indeed calls into question how many of those businesses securing lending in the fourth quarter of 2011 can truly be termed “small.”
Interestingly, U.S. banks reported little changes in commercial real estate lending standards, with only a moderate percentage reporting an increase in demand. Other general findings outlined in the Federal Reserve report include an increase in demand for credit card financing and auto loans during the fourth quarter, with lending standards and demands for residential real estate loans remaining relatively unchanged.
Burns, Adrian. “Loan Officer Survey: Demand Up but Lending Picture Still Bleak.” Nashville Business Journal. 2/2/12. (2/2/12.) http://www.bizjournals.com/nashville/news/2012/02/02/loan-officer-survey-demand-up-but.html.
Federal Reserve Board. “The January 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices.” 1/30/12. (1/30/12.) http://www.federalreserve.gov/boarddocs/SnloanSurvey/201201/default.htm.
Pagliery, Jose. “Small Biz Loan Demand Up, Federal Reserve Says.” CNN money 2/1/12. (2/1/12.) http://money.cnn.com/2012/01/31/smallbusiness/loans/index.htm?iid=SF_SB_LN.