Ben Bernanke, the Federal Reserve Chairman, has declared that it has become easier for consumers and businesses to borrow loans as banks are shoring up balance-sheets. Credit Unions have seen significant signs of improvement in several areas.
The improvement in credit lines has led to large companies sell bonds at a historically low interest rate. People with strong credit records can gain access to credit cards and loans. But at the same time there are challenges for small business owners. Some credit-worthy Americans are finding it difficult to secure loans even after offering collateral like their home property.
Bernanke’s comments have focused on shedding risk from the balance sheets of banks and considerable progress made in this regard. Also, since cash and securities of large banks doubled from 2009 onwards, there are reasons to apply for loans. The way in which banks fund themselves is really safe now. Large banks have good deposits of funds and are meeting their own borrowing needs quite intelligently.
The financial crisis of 2008 is certainly a turndown for the economy. It really took financial institutions by a shock as funding market froze. The accompanying panic stifled the economy and pushed it to its greatest recession in last 70 years. Top American banks had to undergo ‘stress tests’ while they survived and regained a position when they can refinance businesses once again.
Bernanke in his statement said that small business loans though are increasing but yet it is still 15 percent below the 2008 peak. Answering to criticisms, Bernanke said that heightened scrutiny by regulators is asked to take up a ‘balanced approach’ so as to allow banks make loans to businesses.
In order to stimulate the economy, Fed is selling short-term Treasuries and buying the long term ones in a maneuver termed as ‘Operation Twist’. This would mean lower interest rates for business owners who want to borrow. So, it is implied that the borrowing environment is going to become more feasible.
This article was submitted by Raj Tulshan, Director of Business Development of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to firstname.lastname@example.org