Small business lending was up in 2014, but recovered only a fraction of the ground lost during the recession, says Cleveland Fed researcher
In the aggregate, the financial condition of small businesses has improved and the lending environment has become friendlier to small firms seeking credit, leading to an increase in lending. But some of that progress represents just a fraction of the ground lost during the recession, says Federal Reserve Bank of Cleveland researcher Ann Marie Wiersch.
While large business loans have soared to record levels, Wiersch says the volume of bank loans to small businesses, defined in the analysis as loans under $1 million, dropped significantly between 2008 and 2012, and has barely recovered.
Supply-side constraints appear to be easing, but Wiersch notes that demand for credit remains somewhat soft. She points to surveys that show that while optimism among small business owners has made gains in the past few years, it has not yet reached levels observed between late 2005 and early 2007. And while banks are reporting that small business loan standards are easing, they are also reporting relatively tight standards for collateral. Wiersch says this could be problematic for those businesses that have not seen a full recovery in real estate values.
Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
Doug Campbell, email@example.com, 513.455.4479