Main menu

Bank loans to small businesses are rising




Commercial and Industrial Loans are a good measure of bank lending to small and medium-sized businesses, the ones that don't have easy access to the huge corporate bond market. After two years of a severe contraction, in which C&I loans shrunk by 25% ($400 billion), a rebound is finally underway. Over the past three months, loans have risen at a 6.1% annualized pace, after zero growth for most of the second half of last year. It's still small potatoes in the great scheme of things, but it nevertheless marks an important inflection point. Instead of shunning new lending, banks are now expanding their balance sheets; instead of deleveraging, businesses are now in the mood to borrow.

It should be clear from this chart that recoveries are not dependent on an increase in bank lending. Indeed, most recoveries in their initial stages are characterized by deleveraging, as companies shore up their balance sheets in preparation for renewed growth. So the message of the recent increase in C&I loans is not that the recovery is finally getting underway, it's that business balance sheets are healthier, business excecutives are more confident in the future, and banks are once again in the mood to lend. All of this will help sustain the recovery in the years to come.

Filled Under:

0 comments:

Posting Komentar