According to the latest Biz2Credit Small Business Lending Index, small business loan approval percentages at big banks stayed at 13.4% in June. Meanwhile, small banks experienced increased approval percentages for the first time since January, going from 18.7% in May to 18.8% in June.
Approval percentages at non-traditional lenders continued to rise for the sixth consecutive month. Institutional investors’ approval rates increased from 26.9% in May to 27.1% in June, while alternative lenders improved from 28.9% in May to 29.1% in June. Credit unions also increased from 19.8% in May to 19.9% in June.
Total nonfarm payroll employment increased by 209,000 in June, and the unemployment rate changed little at 3.6%, according to the Jobs Report released by the Bureau of Labor Statistics on July 7. Employment continued to trend up in government, healthcare, social assistance and construction. Meanwhile, service industries, including restaurants, travel and tourism, and personal services are still struggling to find workers and have to pay higher wages to fill positions. “While Fed tightening seems to be working still, the tight labor market will lead to further interest rate hikes and higher borrowing costs. This also increases the chances of the economy slipping into recession,” Rohit Arora, CEO of Biz2Credit, said. “Although revenues are strong, wage costs remain high. There’s only so much a restaurant can charge for a burger or a salon can charge for a haircut and expect customers to keep coming back at the same frequency.“Companies that are looking to hire and train staff and purchase inventory but don’t have enough cash on hand are having a hard time securing capital at a reasonable cost right now.”
To determine its Small Business Lending Index, Biz2Credit analyzed loan requests from companies in operation 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 funding on Biz2Credit’s platform.
