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Business Loan Markets

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Credit availability for businesses continued to improve for most of 2004, according to the Senior Loan Officer Survey. In the October survey (covering August, September, and October) respondent banks reported that they had further eased lending standards for commercial and industrial loans to borrowers of all sizes. They also indicated that they had narrowed their lending spreads, reduced collateral requirements, and increased the size of credit lines. This relaxation in lending standards was partly a response to increased competition from other banks and other sources of business credit. What may be more important is that many respondents said they eased credit terms because the economic outlook was more favorable or less uncertain. Lending standards were relaxed despite a reportedly increased demand for commercial and industrial loans by businesses of all sizes. And even with greater demand, prices dropped, indicating that there was a plentiful supply of business credit.

Suggested citation: “Business Loan Markets,” Federal Reserve Bank of Cleveland, Economic Trends, no. 05-03, pp. 17, 03.01.2005.

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