Loan Balances Decline For 12th Time

Online, October 25, 2010 (Newswire.com) - Economic and policy analysts at the U.S. Federal Reserve had forecasted that the loan balances of borrowers would increase for the second straight month - but the economy did not deliver on expectations. February's drop in business and personal loan balances marked a return to the established pattern of 11 consecutive declining months - which was broken by a $10.6 billion upsurge in startup loans and other consumer lending in January.

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Declining borrowing rates are not good news for entrepreneurs - while many young college graduates are opting to go into business for themselves because of the current high rates of unemployment (there were a total of 2.3 million college graduates on the unemployment rolls as of the end of March). This, coupled with residual uncertainty from the financial housing crisis, has had the effect of throwing cold water on the confidence of potential borrowers and many are opting to defer startup loans or other credit options until after the economic recovery strengthens.

Speaking in Dallas on April 7th, Federal Reserve Chairman Ben Bernanke told a business audience that this country's tradition of entrepreneurship and innovation has prevailed to help the economy meet many difficult challenges in the past and he had full confidence that it would happen once again.

A resurgence in loans such as business startup and capital loans is seen by most economists as critical to any economic recovery. Any weakness in borrowing lowers the amount of money that consumers ultimately spend on goods and services - and has a ripple effect on the larger economic performance of the U.S.