We see all sorts of conflicting  reports about whether the decrease in small business lending is caused by meager demand or stingy supply.  But the research usually comes from different institutions.

Now it looks like people within the Federal Reserve are reporting divergent opinions.

The Obama administration and the SBA may have tried recently to loosen small business lending through new legislation. But a new study shows they have a long ways to go to reach small companies-or even to get them to understand what the SBA does.

 A study from CIT Group, which surveyed more than 300 small business owners, found that around 50 percent of respondents didn't know what the Small Business Jobs and Credit Act was or how it might help their companies. The study was conducted before the bill was signed into law. Still, it's legislation you'd think small businesses would have noticed, since it does such things as eliminating borrowers' fees, raising the loan guarantee to 90 percent from 75 percent, and increasing loan limits.  It also creates a $30 billion lending fund to community banks.

The contraction in lending to small companies is a result of deteriorating revenues, not a slowdown in demand.

That, at least, is the conclusion of a new report from the Federal Reserve Bank of New York. It studied 426 small businesses last summer and found that demand for loans actually has increased, but banks have been turning more companies down. And that, of course, flies in the face of other research that shows the lack of lending is due to fewer businesses seeking loans.

Federal Reserve Chairman Ben Bernanke asked lenders to ease credit to small businesses earlier this week, but the situation isn't likely to change anytime soon.

With stricter lending standards, small community banks have stopped lending to small companies. Part of the problem is a lack of demand from solid businesses. Most want to save their cash and preserve their credit while there's still uncertainty surrounding the economic recovery.

The latest survey of senior loan officers by the Federal Reserve showed that bank lending standards on commercial and industrial (C&I) loans were little changed over the three months ended in April.

The survey, however, did show that most of the banks that reported having eased some lending policies in the April survey were large banks. This suggests that larger banks have healed enough to start lending to customers other than those with the strongest credit. On the other hand, none of the smaller banks, which compose roughly half of the respondents, indicated that they had eased their standards on C&I loans to large firms over the past three months.  

It's no secret that lenders have been frantically scaling back consumer credit since the onset of the financial crisis. Since the fourth quarter 2008 through February of this year, revolving consumer credit outstanding has been cut by more than 13 percent, according to Federal Reserve data. 

But now that the economy has begun growing again and the new credit card laws are in effect, banks need to start figuring out how to make money through their once massively profitable credit card operations.

There have been many attempts to call a bottom to credit quality. Much time has been spent scouring through bank filings, combing over charge-off data. The thinking -- or hope, at least -- is that once credit quality stabilizes banks will fully get back into the business of banking.

But, as American Banker reports, executives at major banks are pretty comfortable with how their loan books are performing -- and they still don't plan to start doling out more money.

"All the ingredients are there for bankers to take a leap on lending....But banking executives sent a clear message Wednesday at a financial services conference hosted by Citigroup Inc. in New York: don't expect to see loan growth any time soon. The lenders said their customers are skittish - and so are they."

It's probably safe to say that we're all a little ticked about how long the financial regulatory reform process is taking. And Blackstone Group chief executive Stephen Schwarzman is right there with us.

But it's not so much because he's eager for fundamental change, though he admits change is needed across the financial landscape, not just banks.

Rather, the private equity magnate is worried that all this dilly-dallying is keeping banks from moving forward and lending.

Banks have been between a proverbial rock and a hard place when it comes to small business lending. The Obama administration is telling them to step up loans. But the message from regulators is tread carefully and look out for risk. Since many small businesses, especially in this economy, are in a precarious state, what's a lender to do?

 Now, it looks like the Federal Reserve, along with a bunch of regulatory agencies, are finally trying to untangle these messages.  A recent statement from various financial regulators and the Conference of State Bank Supervisors told bankers that it's okay to loosen the rules somewhat and that, in fact, they should start revving up their small business lending. The easing of standards is welcome, though as Matt Quinn points out, small businesses' difficulty may have more to do with demand than financing.