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10 Straight Quarters of Tightening Credit for Small Business

Posted by: John Tozzi on May 4, 2009

Banks are still tightening credit standards for small businesses, but not to the degree they did at the end of last year. That’s according to the Fed’s quarterly survey of senior bank loan officers is just out (summary here, PDF here). More than 40% of banks surveyed said they had raised credit standards for commercial and industrial loans to small firms (under $50M in revenue) in the last three months, but that’s down from 69% in the last survey released in January. This is the 10th straight quarter that a net percentage of banks has reported tightening credit to small firms.

It’s important to note that these surveys ask about behavior over the last three months, so banks that raised their credit standards at the end of 2008, and have maintained those tighter standards, wouldn’t be counted in the 40% figure.

Also worth noting: loan demand is still dropping. More than 60% of banks said demand for C&I loans from small firms was down over the last three months. Banks attributed this in particular to decreased investment in equipment, as well as less need for financing inventory, accounts receivable, and acquisitions.

Reader Comments


May 5, 2009 4:13 PM

Try to start your business as small as possible without getting a loan. See if your business plan works, then you can start to let it grow. When you would fail,
you do not have too much of a problem, and you can try something different.

Bskinny from TN

May 7, 2009 8:46 AM

Until the Banks loosen credit to small businesses this economy is never going to take off.

John From TN

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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