Cautious Small Businesses Are About To Be Doused By Loans Because Banks Are Way More Optimistic Than They Are

Banks’ aversion to providing loans to small business, ie. the tightening of their lending standards, is finally coming full circle. As shown below by the light grey line, banks have loosened their stance towards small business lending back to even what appears to be pre-crisis levels.

Morgan Stanley’s Richard Berner:


Easier credit arriving: Small business credit availability is still tight, mainly because of falling home prices; real estate constitutes both wealth and collateral for small business owners. But easier credit is arriving, thanks to improved prospects for small business sales, limited downside in home prices, improved terms in ABS markets and the end to banks’ tighter lending standards.

Interestingly, Mr. Berner’s chart shows that banks’ optimism towards small business seems to have rebounded faster than small businesses’ own optimism!

(Via Morgan Stanley, Global Monetary Analyst, 26 May 2010)

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