Is economic optimism leading to more lending?

Business Loans are Back to Prerecession Highs

In the past, this blog has written about the difficulty that many businesses have faced getting loans in recent years. However, recent reports suggest that a steadily improving economy may be changing the market for the better.

According to an article on CBS Money Watch, loans to businesses have actually risen to record highs not seen since 2008. JPMorgan Chase & Co. Chief Executive Jamie Dimon was quoted by the news source as saying that he was dropping the “cautious” from his prior statement that he had “cautious optimism” about the economy.

“We’re using the word optimistic because we are actually optimistic,” he added.

A few recent events have led to this upswing in lending, according to the news source. First, the federal government appears to be beyond budget crises for the time being. Congress recently agreed on a two-year deal, and reports suggest that it is moving toward approving an increase in the debt ceiling without a drawn-out political battle. In addition, economies across Europe are showing positive signs. Taken together, these factors suggest a more stable economic environment that should foster business confidence.

The news source noted that bank investments in both loans and securities have been increasing since 2012. In fact, in the third-quarter of 2013, growth reached 8.7 percent, which is higher than the average recorded during the last 50 years.

In spite of all this positive news, the memories of the past several years should still be clear in many stakeholders’ minds. Lenders should use credit risk assessments to ensure that the loans they make today are sustainable and do not carry unacceptable risk that could lead to problems down the road.

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