There is a clear difference in lending that took place before the Great Recession and lending that took place after everyone recognized that the financial system was in pretty bad shape. Before the recession, it was pretty easy for business owners to get loans from banks. That changed after the recession started.
That’s not surprising, though, considering that loose lending practices contributed significantly to the economic downturn. Banks were essentially over-correcting their past mistakes. It’s like waking on New Year’s morning with a headache that convinces you you’ll never drink again. After a while, though, the headache wears off and you get back to life as normal. Finally, banks are coming out of their hangovers.
Banks Getting More Interested in Business Lending
According to an article in the Boston Herald, the Boston area’s Bank of America is searching for more than 40 loan officers that will work exclusively with small business lending. This will help small businesses in Boston access the money that they need to grow. This isn’t a one-time occurrence, either, as Bank of America plans to roll out the initiative across the country in upcoming months, and other banks are following the trend.
Other large banks such as JPMorgan Chase and Wells Fargo are also starting to loosen up a bit. It’s an easy trend to spot when you look at the numbers. In 2009 business loans fell 19 percent. In 2010, they fell another 9 percent. In 2011, however, business loans increased by 10 percent.
That’s a big step in the right direction. Realistically, we shouldn’t expect numbers to reach pre-recession levels. If they do, start getting worried. It could indicate that banks have adopted freewheeling lending guidelines that could lead to another financial meltdown.
Businesses Can Benefit From Loan Demand
Overall, this is a good thing for small businesses that need a little help entering new markets or expanding to new locations. It costs a lot of money to buy equipment, merchandise, and real estate. Add a few more staff members to your team, and it’s easy to see why businesses need help from banks.
But business lending is a two-way street. Businesses need lenders to access money. And banks also need borrowers to make money.
This means that banks are going to have to compete with each other to attract more lenders. That’s more good news for businesses. A lot of businesses have been struggling to remain active during the recession, but others have been doing very well. Those are the businesses that have been complaining about the lack of loans over the past few years. Now that loans are becoming more available, they will likely pounce on them as soon as possible. In other words, there’s a lot of pent up demand out there. Now that banks have decided to lend again, each one will have to attract willing lenders with better deals and perks.
Photo Credit: Singapore 2010 Youth Olympic Games, Flickr.