Photo of a pile of credit cards.
Getting a credit card may be easier than in years past. CC by Andres Rueda/Flickr

A Federal Reserve bank survey has found that lending standards are showing signs of loosening. For the first time in three years, getting a new credit card is easier. Small businesses are seeing more liberal lending standards at banks for the first time in four years. As the U.S. economy wobbles in its recovery from a severe recession, tight small business credit has been a major setback. Some experts say despite the good news, loosening lending standards will do little to help until demand for small business credit returns.

A reversal for credit card lending standards

The Federal Reserve bank survey questions bankers about the status of supply and demand for commercial and consumer credit in the preceding quarter. Reporting on the Fed survey, said about 8 percent of banks had relaxed credit card lending standards for application approval. None of the banks surveyed said they had further tightened their credit card lending standards. The survey results show that an 11-quarter run of tightening credit dating back to 2007 may finally be over. Meanwhile, Fed data also showed that for most existing cardholders, credit remains limited and expensive.

Demand for small business credit

The latest Fed assessment revealed that for the first time since the recession broke out small business credit may be starting to open up. NPR’s Fed survey report said that loosening lending standards have emerged for the first time since late in 2006. The survey was released shortly after a Fed conference on the small business lending problem in mid-July. Fed chairman Ben Bernanke addressed a vexing disconnect between major corporations sitting on huge cash reserves and small businesses scrambling for loans. Even so, demand for small business loans remains weak, according to the banks surveyed.

A dim outlook for small businesses

It’s been documented that small business owners have complained about the lack of credit since the recession hit. However, Seeking Alpha reports that even though small business lending standards are easing, the negative outlook of small business owners remains a drag on demand for commercial loans. Small businesses owners are less optimistic than nearly any point in the past five years, according to data from the NIFB Small Business Economic Trends report. A mere 6 percent believe now is the time to resume expanding. In the next two quarters, just 19 percent are planning to make a capital purchase. Expectations for expansion of inventory, job creation and sales continue at low levels.

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