I noted back in February that US banks were tightening lending standards into the housing sector. Now they are doing the same with business loans. The New York Times reports today that businesses around the country are finding it more difficult to borrow. As a result, companies that depend on bank financing are having to delay or cancel expansion plans.
The NYT reports one thriving company who called their bank for a routine loan to be told 'We're saying 'no' to almost everyone'. And their experience is not unique. In June, bank credit declined by an annualised pace of 6%, according to a Goldman Sachs analysis. This is a sharp turnaround from 2007, when credit was still growing at double-digit rates.
Back in February, one hoped that it would take 'months' rather than 'years' for domestic US chemical sales into housing and autos to recover. Now, with business loans being cut back as well as mortgages, one fears that it could indeed be years before a genuine recovery is underway.