Are Banks Really Lending?

Banks say they have plenty of money to lend. But are they lending?

What has been your experience?

Some of my clients (some very credit worthy with cash in the bank; and with over 15 years in banking I would know about credit worthiness) are being told by their bank's "Relationship Managers" at their branch that getting a working capital loan should not be a problem.  After completing all the necessary forms and providing the required financial statements and projections they get turned down from an out of state "Manager".  This despite all the local announcements that they have plenty of money to lend. 

This is very frustrating and a big waste of time.  Especially in the economic environment we are in that does not allow for wasted time and effort. 

Based on my experience and what I am seeing and hearing, even with all the advertising print to the contrary, banks are not lending in certain locations of their local or regional markets.  If they are experiencing a higher than expected loan failures in certain markets they reduce their exposure in those markets by not lending in those markets.  Sometimes the bank regulators even require this of the banks. 

So if this is the case, why can't the banks just be quiet about their cash hoard and lending opportunities in the markets with "challenges"?  It is all about image.  If the banks even hinted that they were not lending in specific markets the reaction of the residents and businesses in those markets would be swift and negative.  Deposits would begin to shift to other banks and before you know it those non lending banks wouldn't have all those cash balances to lend any more.  So they continue to mislead those challenged markets in order to maintain cash balances to lend in other markets. 

Welcome to the world of banking!

Reg Baker, CPA
Reg Baker, CPA Website