Are Banks Starting to Make More Loans?

According to a recent article in The New York Times, several of the nation’s biggest banks have reported significant increases in lending. Amidst the economic turmoil, the article states, “the banks have quietly turned on the lending spigot.”

However, a closer look at the state of bank lending reveals that it is nowhere near where it was in 2008, when the financial crisis unfolded. If you adjust the figures for one-time accounting changes, you find only modest increases in bank loans.

Source: Federal Reserve and The New York Times

More importantly, commercial loans remain heavily weighted toward larger companies and the strongest corporate borrowers. Small businesses continue to find it difficult to get the financing they need.

According to the “2011 Mid-Year Economic Report” published by the National Small Business Association, 36% of small businesses reported they were unable to get adequate financing. In other words, more than one-third—which could translate into more than 10 million—of the nation’s small businesses remain “underbanked.”