Approval rates for small business loans at large banks (over $10 million in assets) fell from 15.1% in April to 15.3% in May, while approval rates for Small banks (less than $10 billion in assets) also rose, rising 20.8% in April. to 20.9% in May, according to the latest Biz2Credit Small Business Lending Index.
Among non-bank lenders, approval percentages improved slightly:
- Institutional lenders approved 25.5% of loan applications in May, up a tenth of a percent from 25.4% in April.
- Alternative lender approval rates fell from 26.8% in April to 26.9% in May.
- Credit unions held steady at 20.6% for the second month in a row.
“Small businesses are always trying to determine their financing needs and need to consider rising interest rates. With inflation, entrepreneurs need financing for their growth,” said Rohit Arora, CEO of Biz2Credit. “The cost of capital for small business borrowers will increase since most small business financing is variable rate. The continued gradual increase in loan approval percentages is encouraging. Over the past year, it’s really been about “slowly and steadily winning the race”.
Arora also said the lending industry is watching what the SBA is doing closely, particularly whether the agency will allow fintech companies to process SBA loans.
For the index, Biz2Credit analyzed loan applications from businesses that had been in business for more than two years with credit scores above 680. The results are based on primary data submitted by more than 1,000 small business owners who applied for financing on the Biz2Credit platform.