US banks are increasing their credit lines to small businesses. Since October 2008, Commercial and industrial loans increased in July and August after dropping 25% according to the Federal Reserve data released on Oct. 15.
Mark Vitner, senior economist at Wells Fargo, says, “We are likely to see bank lending increase, but at a very modest pace. The recovery will be very slow. We have a long road back.” Khalique Rehman, recently got $1.8 million loan for his My Pain Clinic in McDonough. But then there are constraints as far as commercial real estates and credit cards are concerned. Improper documentation of foreclosures is yet another problem that looms at large.
But then it is also true that lending is no longer collapsing. In a Sept. 21 meeting, Fed officials cited improvements and said, “There were some signs that credit conditions had begun to improve for smaller firms.” However, it is also found that borrowers like Brian Rist are left disappointed for the reason that the loan that he is negotiating may require him to use his family assets as collateral even though his business earns profits and presently has $13 million in revenue.
Fed Data also reveals that banks buying securities that include mortgage-backed bonds are the highest credit contributors. Year 2011 is expected to yield even better results. Bank of America plans to hire 1,000 employees in-order to focus on companies having sales of $3 million or less.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to