Turned-Away Small Businesses Sought Out CUs
As small business owners looked to their bankers for relief, some got the cold shoulder to requests for lines of credit increases and loan modifications. Tightened lending standards were the result of financial institutions wanting to minimize risk and keep losses low.
Meanwhile, small businesses went on a search for alternatives to fill in the financing and refinancing gaps. Credit unions were soon reporting they were receiving inquiries from firms that may have never thought to seek out cooperatives in the past.
Lending executives at credit unions expanded their small business relationship at record numbers this year. More of the same is expected in 2011 with a few shifts in the winds underway. The October 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices compiled through the Federal Reserve Board revealed that banks are starting to ease their lending standards to businesses.
Most of the respondents that eased standards or terms on commercial and industrial loans cited a more favorable or less uncertain economic outlook and increased competition from other banks and nonbank lenders as important reasons for doing so. Of the relatively small number of banks that tightened standards or terms, most cited as important reasons for the change a reduced tolerance for risk, a less favorable or more uncertain economic outlook or increased concerns about the effects of legislative changes, supervisory actions or changes in accounting standards. Some also cited a deterioration in their current or expected liquidity or capital positions as an important reason.