Credit is Hard to Come By

The downside to the burst of the housing bubble is that much of the credit industry is going with it. Banks are turning more cautious and those who suffer for it are small businesses—which are the backbone of the economy and provide much needed new jobs. Tighter credit is only going to help push the U.S. into a recession and keep it there.

Unfortunately, banks are now demanding higher credit scores, more collateral, and solid business plans before they’ll hand out loans. Those who haven’t been affected as severely by the mortgage fallout may be a little more lenient with their lending than those who have, but you can bet they still have higher standards.

While it seems that many small businesses have accepted the fact that loans may be out of reach for the time being, experts have expressed concern for when the economy picks up and these business owners need loans to help expand and keep up. If banks are unwilling to lend, it could stifle the economy’s recovery.

How do you think banks should handle this situation? On the one hand, banks have been burned by handing out too many ‘bad’ loans, and on the other, they could be responsible for sending the economy into a recession. How do you think banks should handle this situation? [USA Today]