Commercial loans could rebound this year

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Some of the country’s big banks reported earnings on Friday morning, including JP Morgan Chase, Citigroup and Wells Fargo. And lending at these banks, for the most part, increased slightly in the last quarter. It’s worth noting that borrowing, especially corporate borrowing, hasn’t been that big lately.

This is due to both the uncertain times we are going through and the fact that many businesses have borrowed what they needed through government aid programs. But there are signs that could change.

Ongoing supply chain challenges have made it harder for bakery supplies company TMB Baking to import the equipment it sells.

So the company is trying to increase inventory, said CEO Greg Warwick – and that means it has to borrow money.

“We are currently working with Chase to secure a line of credit that will allow us to do this,” Warwick said.

It would also help the company cover the cost of the new employees it is trying to hire and give it more flexibility if, for example, equipment costs more than expected or a customer does not pay on time.

“This money allows us, through the ebbs and flows of business, to be able to manage some of these tough times,” Warwick said.

Commercial lending still hasn’t caught up to pre-pandemic levels, said banking analyst Gerard Cassidy of RBC Capital Markets.

But in the last quarter, he said many businesses have started to feel a little more secure about the economy and are more comfortable taking out loans.

“They use them to replenish inventory, for capital expenditures,” Cassidy said. “So we think commercial loan growth will be very strong in 2022 as the economy continues to expand.”

Other businesses borrow because they are growing.

“We plan to open our third restaurant,” said Steve Chu, chef and co-owner of Ekiben, a restaurant in Baltimore.

Sales have done well over the past year and he wants to grow. But he doesn’t know where things are going in the economy.

Chu said funding his expansion would allow him to keep all the money he made, just in case things go wrong.

“With COVID and, like, all the inflation and stuff, and everything changing all the time, we just think it’s a wiser decision to just hold our money,” he said.

Especially, he said, when borrowing is still very cheap.

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