USA banks are lending less money to businesses and the businesses’ clients are paying their bills slower

The U.S. Federal Reserve said that commercial and industrial loans to businesses reduced by 3% in 2007, dropping from $3.36 trillion to $3.27 trillion, the largest yearly decline since 2001.

At the start of 2008, bank lending to businesses and individuals was at an annual rate of in excess of 10 percent, but by the end of June it had reduced to 6 percent.

Small businesses with less than 500 employees, which employ more than half of the 112 million employees in the USA, have been most severely affected, with tighter lending standards being applied for companies with yearly sales of less than $50 million.

In addition, 73 percent of business owners said that the number of their clients who delayed payment or asked for deferred payment terms had increased.

So USA small businesses are getting less access to credit from their banks and at the same time are being pressured to extend more credit to their clients.

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