Banks easing certain lending standards

In recent days, there have been signs that growing confidence on the part of consumers, businesses and banks is resulting in better conditions for loans. This blog has already covered the issue in a recent post, citing data that shows how loans to businesses have risen to record highs.

A recent article in the Wall Street Journal only serves to corroborate this evidence. According to the news source, many U.S. banks spent the end of 2013 taking steps to facilitate application processing for business loans. As the Federal Reserve’s quarterly survey found, the banks in question reported that more competition and less economic uncertainty allowed them to make these moves.

It didn’t hurt that demand for such loans also seems to be on the rise. Businesses that held off from investing in major capital equipment are now much more interested in doing so. Some are even looking to expand their premises, as evidenced by an increase in commercial real-estate loans.

“We are fairly optimistic there will be some growth coming at least from the small business portion of the economy,” one business owner told Reuters, adding that growth rates are “not too frothy, and not too tepid either.”

The Fed’s report also highlighted efforts by banks to encourage more consumer borrowing. These included easing terms for credit cards and auto loans.

Though these are all positive signs that may point toward an economic recovery, it is important for lenders to use caution as they proceed. Proper credit risk management requires banks to assess the ability of each borrower to pay before issuing more loans.

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