Over the past 18 months, banks have added more than $180 billion in business loans, according to the American Bankers Association.

This, despite the challenge of some borrowers who are still reluctant to add new debt, the ABA said. Banks financed more than 20 million small business loans in 2011, the association noted.

Business lending grew at an annual rate of 13.6% in the fourth quarter of 2011, according to the FDIC. The ABA said it expects business lending to increase by nearly 8% and consumer credit to increase by 4% this year.

Despite the growth of business lending at banks, the ABA said banks and regulators are more cautious because the risks are still much greater than before the recession. As a result of bankers asking more questions of their borrowers, and regulators asking more questions of the banks they examine, some projects may not qualify for funding, according to the ABA.

Some applications will be turned down because it doesn't make sense for the borrower to take on more debt, the banking group said.

“Capital, however, remains the critical concern for lenders, particularly in still weak regions of our country,” the ABA said. “Regulatory overreaction has made the lending situation worse.

Just as too much risk is undesirable, a regulatory policy that discourages banks from making good loans to creditworthy borrowers also has serious economic consequences.”

Meanwhile, credit unions have not let up in their efforts in Washington to increase the member business lending cap from 12.25% to 27.5% of assets. CUNA said a full Senate vote on the Small Business Lending Enhancement Act (S. 2231) could come this week. The bill addresses the MBL cap.

CUNA said a cap increase would inject an estimated $3 billion in new funds into the economy and create up to 140,000 new jobs in the first year of enactment. Credit unions currently hold 5% of the small business loans issued by depository institutions, according to the trade group.