Financing standards loosened with second look programs

Following the financial crisis, there was a serious credit crunch. Wall Street banks are taking the blame now. There is no financing coming from the major U.S. institutions. This is only a problem because they took millions in government bailout. Last December President Obama met with bank executives at the White House and urged them to discover new solutions to increase small company lending. Obama made one suggestion worth remembering. This recommendation was that we take a “second look” at loan applications. That meeting encouraged major United States of America financial institutions to start the second look programs. Nine months later, you will find signs that a second look may be making a difference.

Second look doing well

The president went a little further than just suggesting Wall Street banking institutions start taking a second look last December. An Associated Press report on the meeting said that when Obama asked bankers to “explore each possible way” to increase small business lending. He suggests more than just a second look. He wants them to take a “third and fourth look” also. Chairman of the Financial Services Roundtable, U.S. Bancorp CEO Richard Davis, said the group which represents the country’s largest financial corporations would get the idea presented to them.

Lending back within the good old days

Almost all the members of the Financial Services Roundtable are using second-look products just nine months later. Financial institution of The United States Corp., J.P. Morgan Chase and Co., PNC Financial Services Group Inc. and U.S. Bancorp are all members of this. The Wall Street Journal reports that second look programs are a throwback to good old-fashioned loan underwriting. A lender has more to think about when it comes to choosing who can borrow so the relationships and track record of the borrower come into play along with the credit scores analysis and other industry driving data. Banking institutions are doing anything they can to make individuals look worthy of loans. This includes asking about unreported sources of income along with asking about credit rating errors. The second look program is having an impact, states the Journal . Last month the Federal Reserve surveyed senior loan officers. It found that since 2006, this is the first easing of lending standards that has been seen for small businesses.

The second look is often worth it

Rather than avoiding risk, financial institutions are using the program as a business opportunity with second looks. PR purposes is the reason why Alan Sherter from bNET thinks financial institutions are doing the second look program. It is not at all for risk in lending. Small Businesses aren’t likely to do really good when first starting. The loans being given probably won’t make the unemployment rate change much. The second look may be good for a small local business that wants to just survive the recession and hopes to expand one day.

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Associated Press

msnbc.msn.com/id/34416646/ns/business-us_business/

Wall Street Journal

online.wsj.com/article/SB10001424052748704062804575510302866961116.html

bNET

bnet.com/blog/financial-business/due-credit-banks-offer-second-chance-to-small-businesses-rejected-for-a-loan/7715