Regulators urge banks to make loans to creditworthy small businesses to aid economic recovery

Regulators urge loans to creditworthy small firms

WASHINGTON — Regulators are urging banks to make loans to creditworthy small businesses, a move that would support the economic recovery.

Small businesses have had an especially hard time getting loans. That has crimped their ability to expand operations and hire. Small businesses usually help drive job creation during recoveries, but credit clogs have hurt hiring.

In a joint statement Friday, regulators including the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency — said that banks that engage in “prudent small business lending after performing a comprehensive review of a borrower’s financial condition will not be subject to supervisory criticism for small-business loans made on that basis.”

Regulators said they recognize the “important role” small businesses play in the economy and the “difficulty” they are having obtaining or renewing loans.

The Obama administration does as well and has stepped up efforts on this front.