Commercial & Industrial Loans For Large & Medium Borrowers

Bank credit conditions loosened moderately between April and July according to the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices. Of the domestic banks responding to the survey, 21.8 percent loosened standards for commercial and industrial loans to large and medium firms during the survey period, i.e. general business loans to firms with annual sales of $50 million and up. Twenty percent of banks reported stronger demand from large creditworthy borrowers. Smaller borrowers did not fare quite as well in the survey with 7.8 percent of domestic banks loosening standards and just 5.8 percent of banks reporting an increase in loan demand from smaller firms. These results are in line with other surveys showing that small businesses have had a more difficult time rebounding from the recession.

A separate question in the survey asked about supply and demand conditions for commercial real estate loans, and the results were moderately encouraging with 5.5 percent of domestic banks loosening standards and 21.8 percent reporting stronger demand from creditworthy borrowers. Overall, debt capital is available from banks at favorable terms for both general business and commercial real estate loans. Banks are competing for good credits, which explains why terms have become more favorable for borrowers who qualify.