Fed: Credit Improving for Small Business

May 10, 2011

Yesterday, Federal Reserve Governor Elizabeth Duke claimed that recent anecdotal evidence suggested that conditions were improving for small businesses, saying: “Although no definitive data source exists, the combination of a variety of recent survey results paints a picture of increasing optimism about future sales and business conditions and a corresponding easing of credit availability for small businesses.”

Duke has utlilized NSBA’s Economic Reports in past commentary and analysis on the state of small-business lending.

It would appear that, to a degree, the results of the U.S Federal Reserve’s most recent Senior Loan OfficerOpinionSurvey back up this claim. The survey found that, in the last quarter,commercial and industrial loan standards and terms were either unchanged or somewhat easier for both large and small firms. No bank reported tightening standards on commercial and industrial loans.

About 55 percent of domestic banks reported improvements in the overall credit quality of large- and mid-size firm loan applicants, while approximately 35 percent reported improvements in the overall credit quality of small firms that applied for loans. The Fed defines a small company as one with annual sales of $50 million or less.

While 25 percent of the banks reported greater commercial and industrial loan demand from large and mid-size firms, only about 10 percent reported increased demand from small firms.

The survey polled 55 U.S. banks and 22 foreign financial institutions, which responded between March 29 and April 12.