Credit Relatively Easy to Obtain, FDIC Says

Corporations are finding credit more available now than in previous recessions because markets are more efficient and capital is cheaper, a government report said.

The Federal Deposit Insurance Corp. report said large corporate borrowers are responding to banks’ tighter commercial loan standards by borrowing funds through capital markets.

Commercial and industrial loans fell by 9% in the third quarter of 2001, yet corporate bond issuance for nonfinancial and non-farm businesses grew by 14% in the 12 months ending in the third quarter, the report said.

“In contrast to other recent recessions, commercial credit outstanding from all sources continued to grow in 2001 in real terms, albeit at a slower rate than in the three previous years of rapid credit expansion,” the report said.

This reflects a broader trend of corporate borrowers bypassing banks for credit needs. Corporate borrowers held about 55% of their debt in corporate bonds and commercial paper, a type of short-term debt, up from 45% in the 1990 recession. Smaller businesses with more limited access to capital markets continue to rely more on bank loans.