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Banks have been listening to Federal Reserve Chairman Ben Bernanke.

A new survey released by the Fed on Monday shows that banks are easing lending standards for small businesses for the first time in almost four years.

Bernanke urged banks to give loans to more creditworthy operations in mid-July. The new survey, which elicited responses from 57 domestic banks and 23 U.S. branches of foreign banks, was conducted July 13-27.

Responses indicated that banks had eased standards and terms over April, May and June, particularly when faced by competitive pressures from other banks or from non-bank lenders. The last time the Fed found a projected relaxation of lending standards for small business -- defined as a firm with annual sales of less than $50 million -- was 2006.

The greatest increase in lending was exhibited by large domestic banks -- classified by the Fed as banks with assets greater than $20 billion as of March 31. Of course, big banks exhibited fairly stringent lending practices in the wake of the 2008 financial crisis, and as such, had a tighter grip to loosen.

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"When you're getting loose from the most severe credit crunch since the 1930s, it's all relative," Paul Ashworth of Capital Economics tells the Wall Street Journal.

Ashworth’s sentiments are echoed by small business owners still waiting for their banks to loosen their iron grip. Jay Colucci, who we previously interviewed, was told he could get a loan to hire employees for his tradeshow business if the small business bill passed through Congress. Sadly, he has yet to secure funding.
“[There has been] no real change for us,” Colucci told MainStreet. “Our lender had said that if we signed more business that would push us over to where they would move forward. However, all that really means for us is that we're providing more collateral to make up the difference that the 90% guarantee would have covered.”

A major proponent of the stalled small business bill was a $30 billion government fund that would back loans made to small businesses by community banks. The bill, however, stalled in the Senate when Republicans and Democrats couldn’t agree on the list of amendments to add before leaving for summer vacation. The bill is not expected to be heard again until September.

Want to know how to get past strict lending standards? Check out this MainStreet article for information on how to get a bank loan!

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