Business Credit Is Tightening: Questions To Ask Your Banker

Banks are tightening credit standards for business loans, according to the Federal Reserve’s quarterly survey of senior lending officers. That true for large and medium-sized banks (shown in the chart above) as well as for small banks. The interest rates on business loans are rising relative to the banks’ cost of funds. Bankers also reported lower loan demand.

Small business owners as well as corporate executive should talk to bankers regularly, even if they are not borrowing money currently. The conversation should go beyond the banker pitching the institution as a great partner. Instead, business owners should understand where their company stands relative to the bank’s credit standards. Whether or not the company currently has a loan with the bank, knowing whether they would qualify for a loan now or in the future will help the company’s planning.