24 May 2018

Americans Are Borrowing Again But Still Less Than Before Freeze

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BOISE, Idaho—When the economy nose-dived several years ago, Lou Aaron found it impossible to get a bank loan, forcing him to use six different credit cards to keep his 1950s-style drive-in restaurant running.

Now, the 50-year-old chef said banks are coming to him offering loans. His sales are climbing, and he expects to borrow $350,000 to open a third location next year where he will sell prime rib, hamburgers and his "Idaho Ice Cream Potato" dessert. 

America's credit crunch is easing. For the past six years, consumers and businesses have struggled to borrow money, but slowly, things are getting easier.

Large U.S. companies are taking advantage of low interest rates to borrow record amounts of capital in bond markets. Banks are opening the spigots for commercial and industrial firms, and loans grew at an 11% annualized rate in the first quarter of this year, the sixth double-digit percentage increase in seven quarters, Federal Reserve data show. According to the Fed's survey of senior bank-lending officers released Monday, 28% of banks lowered the cost of credit lines early this year to smaller firms like Mr. Aaron's that have annual sales of less than $50 million. Residential lending began edging up last year, and even people with bad credit can get a loan to buy a car these days.

In all, some $713 billion in credit flowed to U.S. households and nonfinancial businesses last year, double 2011's $336 billion, according to the Fed. That is still a fraction of the $2.2 trillion in credit that lifted American consumers and businesses in 2007.

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