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CNN Calling! Reporter wants to know…

In his July 12th speech regarding Restoring the Flow of Credit to Small Businesses, Federal Reserve Chairman Ben Bernanke said:

We have heard the often-expressed concern that bank examiners have
prevented banks from making good loans. We take this issue very
seriously. The Federal Reserve has worked assiduously with the other
banking regulators to develop inter-agency policy statements on this
issue, aimed at both banks and examiners. Our message is clear:
Consistent with maintaining appropriately prudent standards, lenders
should do all they can to meet the needs of creditworthy borrowers.6

Doing so is good for the borrower, good for the lender,
and good for our economy. To ensure that this message is being heard and
acted upon, we have conducted extensive training programs for our bank
examiners as well as outreach with bankers, and we will continue to seek
feedback from bankers and borrowers.

CNN Reporter Colin Barr contacted me to ask what my business banking contacts are finding in terms of loans to small business. I called five of you but would like to hear from more.

Here are my questions. Answer any or all. Add your own.

  • What is happening with loan volume to small- and mid-size business?
  • Are the stronger businesses still holding back in requesting loans? Why?
  • Are your underwriting standards tighter than pre-recession?
  • If so, is that a good thing?
  • Are the small- and mid-size business loan requests you are turning down because the borrower cannot even meet the pre-recession underwriting guidelines, not to mention your current guidelines?
  • Is the main deterrent to small business lending the continued weak economy resulting in (still) depressed revenues for these businesses?
  • Does your bank have money to lend to small businesses?
  • Are the Examiners being reasonably prudent?
  • Do you feel that if you find a good loan, can understand and explain the deal, but the recent numbers do not meet cashflow or DCR requirements because of a down 2008 (let’s assume 2009 improved and 2010 is looking good)…could you get it approved? Would it pass muster with the Examiners?

What will it take to restore the flow of credit to small businesses?

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at www.LendersOnlineTraining.com, she speaks at banking associations on risk management, lending and director finance topics.
  1. Dom Rossi

    Um, more jobs equal more consumer confidence and increase in consumption. (nasty word to the minimalists)increasing small business revenues and earnings which means increased cash flow which increases credit worthiness of small business/owner net worth which means debt service is increasingly likely which should help to restore flow of credit. (Run on sentence but had to be delivered in one fell swoop).
    Benanke’s statement is right on but, lenders have to be confident the politicos will not continue to regard lending institutions as the enemy who need rigid supervision in the form of more and more restrictive legislation. In the current environment, bank (like Wall) has become a four letter word.
    Ultimately, confidence in our government and in ourselves will restore credit flow and revive the economic engine.
    I am not a lender but an Interim CFO wanting to know just how to make loan applications more palatable to chary lenders.