Banks Cutting Back on Loans to Businesses
The Federal Reserve recently reported that business loans have decreased at a record annualized rate of 28 percent. On one hand, banks have tightened standards. On the other hand, many businesses are not looking for loans in this economy, also keeping banks from lending.
Large companies can turn to retained earnings, corporate bonds, securitized loans and new equity and other sources for funding, but the decline prevents small businesses dependent on bank loans from expanding, hiring and refinancing debts. If small businesses cannot borrow money to grow production and employment for the 45 percent of jobs lost, the credit squeeze could curb economic recovery for years.
Source: MarketWatch.com | October 9, 2009