A new report issued by the Federal Reserve shows banks boosted lending to businesses in the second half of 2011, marking a sharp change in strategy and ending more than two years of rigid qualifying practices. Commercial and industrial loans grew at an annualized pace of more than 20% in August and more than 15% in October, representing the best growth in nearly 10 quarters. By contrast, commercial lending fell 9% last year and nearly 20% in 2009, according to government statistics.
Economists contend the policy reversal by banks is a sign of an improving economy, especially since lenders had been aware for some time of the Federal Reserve’s plan to employ tougher new capital standards. The rules – preliminarily announced last week – will require banks to retain more capital to protect against future financial crises. Despite the new standards, lenders appear confident that economic conditions will become more positive in 2012 and are increasingly willing to lend to businesses.
There is already evidence that attaining credit is not the problem it once was for business owners. A recent survey released by the National Federation of Independent Business (NFIB) shows only about 3% of people who own companies cite lack of credit as their biggest concern, well behind taxes and regulations. It’s actually entrepreneurs who are wary of taking out a loan, as just 12% of survey respondents believe demand for products and
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