A big reason for the slow recovery has been that the nation's battered banks haven't been able or willing to lend. There are signs that's changing and that bank lending is helping to support stronger growth.
Paul Kasriel, chief economist at Northern Trust, a Chicago-based bank, say his reading of Federal Reserve data has convinced him that banks have finally taken the baton from the Fed and are now making credit more available.
"We've seen a sharp increase in business loans on the books of banks," he says.
And Kasriel says consumers are getting more credit, too. "In fact in January we saw the strongest car and truck sales since I believe May of 2008, and one of the explanations was that credit was now beginning to flow to households again," he says.
Kasriel says he believes it's because banks have a cleared many of their bad loans and strengthened their capital, their cushion against loses.
Jim Chesson, chief economist at the American Bankers Association, agrees. "Problem loans are being quickly put behind the industry. They have the deposits to be able to make loans, and the real issue is, is there creditworthy businesses that are able to borrow now and willing to borrow."
Craig Carrel's company Team 1 Plastics, based in Albion, Mich., is one such firm. "Business is great right now, the best it's been since the fall of '08," he says.
Team 1 Plastics makes injection-molded components that show up in vehicles produced by the Big Three U.S. auto companies, and Japanese and German carsmakers, too. The recovery of the auto industry has boosted business so much that Team 1 asked Bank of America to boost the line of credit it uses to finance its operations. Carrel says the request has been tentatively approved along with a loan for some new equipment.
"I think we have a good story, and I think part of what helped us for additional credit is the bright outlook, especially in automotive," he says.
Dan Thystrup's company Adventureglass has not been as lucky. The firm makes paddleboats out of fiberglass for places like SeaWorld and Disney World. "Our main product is paddleboats that look like ducks and swans and pirate ships, and things like that." Thystrup says.
The company's revenues have fallen from about $1 million a year before the recession to about half that now. Still, Thystrup says he needs to replace an old factory building, and that requires getting a loan.
"And we worked on it a little bit with our bank and they were not very interested in doing anything for us," he says.
Thystrup says U.S. sales are soft and foreign sales to places like Kuwait and India are what's keeping Adventureglass afloat. As a result, he says, just renewing the credit line with his bank late last year was an ordeal.
Another strike against Thystrup may be that his main collateral is real estate, including his home and business buildings. William Dennis, of the National Federation of Independent Business says that's hurting the creditworthiness of lots of small firms.
"Small firms own a ton of real estate, and a lot of that's being used for collateral. And a lot of that real estate is still not doing well at all."
Dennis says a recent NFIB survey of 850 small firms shows an increased demand for credit last year, but no increase in the number of bank loans received.
However, Fed data suggests banks are loosening their purse strings — they are identifying more credit worthy borrowers and more businesses and consumers are gaining the confidence to borrow again
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