Small Business Borrowing Picks Up Some Steam

Business borrowing may be stronger than loan data seem to suggest. While commercial and industrial bank loans have trended downward this year, Maury N. Harris of PaineWebber Inc. finds that demand for funds by small and midsize borrowers is growing.

He points to the Federal Reserve's May survey of bank loan officers around the country, which makes the observation that "in contrast to previous surveys, a significant number of respondents reported some easing of terms and standards on commercial and industrial loans." In the case of big businesses, that easing didn't have much impact, since they continued to pay off bank loans and shift their borrowing to nonbank sources.

But the loan officers also reported increases in demand from midsize borrowers and small companies. Harris notes that both groups have now registered increases in borrowing activity in four of the past five quarterly surveys. "Their growing appetite for funds," he says, "implies that the business climate is gradually improving."

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