Now that demand is up and business is finally improving for many companies, they’re doing what they always do at the beginning of an expansion: calling the bank and asking for a loan. And in stark contrast to the depths of the financial crisis, banks are saying yes. In the last three months of 2010, U.S. Bancorp wrote $8 billion in new business loans, the most in two years. JPMorgan Chase added 400 midsize companies as clients. And bank loans overall grew for the first time in two years, according to the Federal Reserve.
“Companies are talking about growth in ways they haven’t for three years,” says Perry Pelos, head of Wells Fargo’s commercial banking. Loans are one of the best gauges of economic growth. Small and midsize businesses that form the backbone of the U.S. economy take them out to pay for business needs; big corporations, in contrast, go to the bond markets for low-cost debt. Borrowing by smaller companies is being watched especially closely because it may indicate those companies are preparing to hire. So far, the economic recovery hasn’t been accompanied by job growth. Small companies created about three of every five new jobs over the past two decades.
Today’s poll question: Has your business borrowed money from a bank in the last six months?
