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Banks Ease Terms

September 3, 2012

As one lender told me; "first we saw pricing go then terms, now it's a free for all out there". After hiding through most of 2009, lenders have spent the last few years coming back into the marketplace only to find that money is over-supplied and under-demanded in today's economy.

The Federal Reserve's quarterly survey of senior commercial loan officers reports a continued easing of lending terms. To clarify, this means that credit worthy companies are finding borrowing much more attractive. Companies who can't get credit will remain unbankable until they can evidence real change in their business. But the companies who are bankable are getting better rates and better terms.

According to the article in CFO Magazine, 58 percent of financial institutions surveyed have cut their spread (gross margin) to remain competitive. Thirty-two percent have reduced their interest rate floors and 17 percent have lowered ancillary costs on lines of credit.

Almost all domestic banks said "more aggressive competition" from other lending institutions has forced them to respond with softer terms.

I mentioned this last fall in my post and things seem to only be improving for bank-able businesses.

Jeff Sands is a Director with Dorset Partners LLC ( which helps companies revitalize and refinance in challenging situations.