Banks tighten small-business credit as loan demand weakens
The Fed survey shows a split between larger and smaller borrowers, with tighter commercial-property lending too.
U.S. banks tightened lending standards for small businesses in the third quarter while leaving standards for large and middle-market companies basically unchanged, according to the Federal Reserve's October lending survey released Monday. Demand for business loans weakened across firms of all sizes.
Banks cited a less favorable or more uncertain economic outlook and worsening industry-specific problems among their reasons for tightening standards. For weaker demand, they pointed to less customer investment in plants and equipment and borrowing shifting to other bank or nonbank funding sources.
Commercial-property lending was more restrictive across the board. Banks reported tighter standards and weaker demand for construction and land development, nonresidential property and multifamily loans. The survey describes changes over the previous three months, not a real-time count of loans approved or rejected.
Household credit was mixed rather than uniformly tighter. Most consumer lending standards were basically unchanged, but banks tightened credit-card limits and minimum credit scores for auto loans. Credit-card demand strengthened while auto-loan demand weakened. The results show why a single interest-rate headline does not describe every borrower's access to credit.
