I am very happy to have finally retired from banking, and I am grateful to Dave Westburg and John Weller of Billboard Insider for letting me write articles about out of home finance. Before I retired in July, it was clear that banks were tightening credit standards and terms. I could see it at my own bank, and I heard about it from fellow bankers around the country.
The July 2023 Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices confirms it. Banks have been tightening standards for small firms for six quarters now, and in the latest report, 49% of banks were still tightening, and no banks were easing.
Credit Standards for Small Firms (annual revenue of less than $50 million)
| Jan-22 | Apr-22 | Jul-22 | Oct-22 | Jan-23 | Apr-23 | Jul-23 | |
| Tightening | 0% | 7% | 24% | 33% | 44% | 48% | 49% |
| Unchanged | 91% | 87% | 75% | 65% | 56% | 50% | 51% |
| Loosening | 9% | 6% | 1% | 2% | 0% | 2% | 0% |
With the failure of several significant banks this year, I just don’t see banks loosening standards anytime soon. Also, many banks are focusing all of their attention on full relationship clients with deposit accounts (that carry meaningful balances) and treasury services.
Not only have interest rates continued to climb, but the same July report indicates a majority of banks increased credit spreads (the margin over the underlying rate) and no banks have reduced spreads.
It bears repeating that it’s important you meet frequently with your bank during times of tight credit to keep your bank comfortable with your business. When was the last time you met with your banker? What’s familiar is often considered less risky. In times of tight credit many banks reduce or stop lending to out of home. Now might also be a good time to reach out to a lender who specializes in the out of home industry.
Ken Altena has 40 years of experience as a banker and has worked with the out of home industry for over 25 years. He has joined the team at Billboard Loans, LLC as a partner. You can contact Ken at 206-636-8478 or by emailing kenaltena@billboardloans.com.
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