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Fed Survey Finds Stronger Demand, Easier Access for Commercial and Industrial Loans

  • Federal Reserve poll of bankers finds increased demand and eased standards for commercial and industrial firms of all sizes in the third quarter of 2021
  • Easing of standards driven by factors such as better economic outlooks and increased competition from other banks and non-bank lenders
  • Commercial and industrial loan demand remains down from pre-pandemic levels, though banks see it rebounding in the next six months

Summary by Dirk Langeveld

Banks are seeing an uptick in demand and easing standards for loans to businesses, according to the Federal Reserve’s October 2021 Senior Loan Officer Opinion Survey on Bank Lending Practices.

During the third quarter of 2021, on balance, banks said they have seen more interest in commercial and industrial loans to large and middle-market firms. Demand for small firms was essentially unchanged.

Standards for commercial and industrial loans had generally been eased for firms of all sizes. A significant share reported easier terms on the maximum size of credit lines, the cost of credit lines, the use of interest rate floors, and loan covenants. A moderate share of banks said they had reduced the cost and increased the maximum size of credit lines for small firms.

  • Standards were being eased largely due to a more favorable or less uncertain economic outlook as well as more aggressive competition from other lenders, including non-bank lenders; banks also reported factors such as the easing of industry-specific problems and an increased tolerance for risk
  • Banks reported weaker demand for queried commercial and industrial and credit card loan categories compared to pre-pandemic levels at the end of 2019, but expected stronger demand in the next six months
  • Major shares of banks were reporting an increased demand due to businesses’ need to finance inventory, accounts receivable, and mergers and acquisitions, as well as increased investments in facilities and equipment

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