Wednesday, November 07, 2007

Fed Sees Credit Tightening

Credit to businesses of all sizes is tightening according to the October 2007 Senior Loan Officer Opinion Survey on Bank Lending Practices published by the Federal Reserve.

In the October survey, domestic and foreign institutions reported having tightened their lending standards and terms on commercial and industrial (C&I) business loans over the previous three months.

About one-tenth of respondents—a fraction similar to that in the July survey—reported tightening their lending standards on C&I business loans to small businesses, and about one-fifth of domestic institutions reported charging higher loan rate spreads on such loans.

Two things to note.

First, this was the Fed's first poll of loan officers since the summer credit crisis. The next poll may be more telling once its known how many more Merrill Lynch and Citigroup type fiascoes are uncovered.

Second, the poll results were received prior to last week's reduction of key benchmark interest rates that led to a reduction in the prime rate by commercial banks. With the Fed reductions, banks may take a hint not to constrain the availability of credit to small business more than necessary.

All in all, it's another good data point, but not yet conclusive evidence of a system-wide tightening of credit for small business.

But keep my telephone number handy just in case a credit crunch becomes too real for your small business. Probably the only credit crunch you really care about.

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Tags : credit crunch , small business , Federal Reserve , business loans

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