FDIC Reports 3rd Quarter Drop in Loans

The Federal Deposit Insurance Corp, FDIC, reported the largest drop in bank loans since they started keeping records in 1984 -  2.8%, $210.4 billion. Banks reported profits of $2.8 billion in the third quarter, reversing the second quarter loss of $4.3 billion. Banks are beginning to earn money again, but they aren’t investing enough in businesses, especially small to medium size ones.

Because small businesses comprise the largest portion of the economy (64% of new jobs were created by small businesses) it essential to get them back on track as a strong economy is dependent on the stability of small businesses. Banks overlooked many risks in the real estate market, and when the housing market busted, they accumulated lots of bad debt, hampering their ability and their desire to lend to small businesses as well.

124 Banks have failed in 2009 so far, and the FDIC has put aside another $38.9 billion to cover losses and protect customers of failed banks. If merchants are interested in expanding it seems that they will have to seek out other forms of financing from private investors and merchant cash advance companies until banks regain confidence in the economy and resume lending.

To see the original article in USA Today click here!