Over the past 18 months, banks have added more than $180 billionin business loans, according to the American BankersAssociation.

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

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

Despite the growth of business lending at banks, the ABA said banks and regulators are more cautious because therisks are still much greater than before the recession. As a resultof bankers asking more questions of their borrowers, and regulatorsasking more questions of the banks they examine, some projects maynot qualify for funding, according to the ABA.

Some applications will be turned down because it doesn't makesense for the borrower to take on more debt, the banking groupsaid.

“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 thatdiscourages banks from making good loans to creditworthy borrowersalso has serious economic consequences.”

Meanwhile, creditunions have not let up in their efforts in Washington toincrease the memberbusiness lending cap from 12.25% to 27.5% of assets. CUNA saida 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 innew funds into the economy and create up to 140,000 new jobs in thefirst year of enactment. Credit unions currently hold 5% of thesmall business loans issued by depository institutions, accordingto the trade group.