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Business Loan Markets

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For most of the past year, the Federal Reserve Board’s Senior Loan Officer Survey has shown continued improvement in credit availability for businesses. For the survey covering February, March, and April 2006, respondent banks reported further easing their lending standards for commercial and industrial loans to borrowers of all sizes, narrowing their lending spreads, and reducing the cost of credit lines. They attribute this to stronger competition (from other banks and other sources of business credit) and greater liquidity of business loans resulting from a deeper secondary market. Lending standards have relaxed despite a reported increase in demand for commercial and industrial loans by large and small businesses; this indicates that a plentiful supply of business credit is allowing prices to drop despite greater demand.

Suggested citation: “Business Loan Markets,” Federal Reserve Bank of Cleveland, Economic Trends, no. 06-08, pp. 18, 08.15.2006.

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