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A new survey conducted by none other than the Federal Reserve Board of Governors--you know, the group down in Washington that our very own Michael Taylor is so cozy with--reveals that while banks and other lending institutions continued what is now a nearly year-long tightening of their credit extension practices to all businesses, it is the small firms that are getting hit hardest and fastest.
The Fed's July 2008 survey, released yesterday and covering May, June, and July, showed 60% of polled domestic banks having tightened lending standards to big and medium-size companies--a slight increase from the results of the previous, April survey. However, a full 65% of those banks reported stricter standards for small firms, a huge increase over the 50% figure reported in the April survey.
It's...tough out there. Tell us how you're coping. bizboxonslate@gmail.com
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There is definitely a "Barn Door" effect going on...by which I mean banks are aggressively shutting the Barn Door long after the horses have galloped off. Each bank is trying to be the most 'responsible' Barn-Door Shutter with respect to reporting to their regulators. Because of losses to a variety of credit exposures, they are not even considering lending to small businesses, and/or are restricting credit to existing customers, many of whom never missed a payment.
But as I wrote in Bizbox back in Oct, Nov, Dec 2007 postings, I don't really think banks are in the business of lending to small businesses, unless they can have real estate as collateral (which doesn't apply to most businesses). Realistically the main source of small business credit is the credit card market, which is dominated by about 7 national companies, and has totally disintermediated the rest of the 8,000 FDIC-insured banks in the country as far as small-business lending goes.
Posted by Michael Taylor | August 12, 2008 4:15 PM
Posted on August 12, 2008 16:15