NEW YORK — This time last summer, banks were eager to issue commercial loans without any pressing concerns on whether a borrower could manage the payments. However, banks are now much pickier about who gets the loans, especially among newer and smaller businesses, the New York Times reported today.

The aftershocks of billion dollar losses on the consumer mortgage side have spilled over into commercial lending at banks, according to the article. Commercial and industrial loans from banks fell nearly 3% in 2007 from $3.36 trillion to $3.27 trillion amounting to the biggest yearly drop since the credit squeeze started in 2001's recession, the publication reported. Still, credit extensions to businesses were growing at double-digit rates earlier this year compared to an annualized decline of more than 6% by mid-June, the article read.

Those businesses with strong credit histories and profits are still prime candidates for loan approvals but longer wait times and higher rates are likely to occur, according to the article.

Meanwhile, some credit unions and CUSOs are also feeling the pains in commercial lending with some pulling back on loans and others having to file suit to recover on defaults.

Instant Insights /

Banks' Business Lending Spigot Continues to Drip

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