Demand for business loans at the biggest Utah-headquartered bank seems to have bottomed out and is rising again, suggesting the recession's tenacious grip on Utah credit markets may be easing.
"That would probably be a fairly accurate statement," said Rob Brough, spokesman for that bank, Zions. "The particularly challenging time for loan demand was late last year and early this year. The numbers we are seeing in loan volume now would support that.
Lending for commercial purposes represents the lion's share of Zions' loan business. In September, the bank made 2,917 new loans -- 49 percent more than the same time last year, with much of the demand coming from small businesses.
Because of the financial crisis, loan demand at Zions sank almost 15 percent last year as businesses cut back on capital spending. This helped lead to job cuts and a jobless rate that now stands at a 22-year high of 6.5 percent.
Statewide, nearly 41,000 jobs were eliminated in the year ending Oct. 31. Brough said when thousands are suddenly out of work, many people strike out on their own and start new businesses.
The Small Business Administration has been helping with loan-guarantee programs that Brough said are making banks more willing to lend. In May, the agency relaxed eligibility requirements for its popular 7(a) loan program. A month later, the SBA launched the ARC temporary relief program, which helps businesses keep their doors open with deferred-payment loans.
"That drives additional loan demand for those who are seeking to start a business or potentially expand an existing small business," Brough said.
While demand for Zions loans is reviving, credit is still hard to find in other parts of the country. Last week, Federal Reserve Chairman Ben Bernanke said "headwinds" of reduced banking and a weak job market will probably hold back the economic recovery.
Two days later, the Treasury Department said the nation's biggest banks have reduced their lending to small business by more than $10 billion over the last six months.
And Rep. Barney Frank, D-Mass., sent a letter to bank regulators urging them to ease up on hundreds of community banks that have cut back on lending. That happened when they were ordered to set aside more reserves to cover possible loan losses and sometimes to shake up management.
In Utah, though, access to credit apparently isn't so constrained.
Wells Fargo said loan demand in Utah is strong right now and business lending should increase next year, albeit slowly. KeyBank President Jill Taylor says her bank's pipeline of loans during the fourth quarter is bigger this year than last, with demand greatest from bigger companies and businesses that want SBA-backed loans.
And Zions said it hasn't tightened its lending criteria in the wake of the financial meltdown that began last year.
Dan England, chairman of C.R. England Inc., said his Salt Lake City-based trucking company had no trouble finding financing at reasonable interest rates this year to replace 1,800 tractors and about 800 trailers. The amount England needed to borrow was close to $240 million.
"There were a lot of people competing for it, and the competition, if anything, may have become more intense because the opportunities have diminished. And so, if they find an opportunity, that is something they want to do," England said.
Frank D'souza, president of Seaich Corp., said Mountain America Credit Union refinanced a loan and also extended additional capital that D'souza can use to pay the company's daily expenses. The financing was done under an SBA program that saved him $35,000 in fees.
"It helped our cash flow tremendously. It was nearly a $1.2 million loan that was refinanced at a lower interest rate," D'souza said.
The rise in lending demand "squares very well" with what the Utah Department of Workforce Services has been observing about the economy, chief economist Mark Knold said.
"We were anticipating hitting the bottom of the economy in late summer and early fall, with some sort of signals here and there of things turning around," Knold said. "Even though [the recovery] won't be very strong, all the indicators are turning back in the other direction."
Unemployment increased last month, but job losses in some industries appear to be moderating. Temporary help employment is growing slowly, Knold said.