Small business loan approval percentages at big banks with more than $10 million in assets inched upwards from 15.3% in May to 15.4% in June, while small banks’ approvals also rose from 20.9% in May to 21.1% in June, according to the latest Biz2Credit Small Business Lending Index. Loan approvals by banks have increased during every month of 2022.
Among non-bank lenders, approval percentages improved slightly, even as credit union lending approvals dipped:
- Institutional lenders approved 25.6% of loan requests in June, up one-tenth of a percent from 25.5% of loan requests in May.
- Alternative lenders’ approval rates rose from 26.9% in May to 27.1% in June.
- Credit unions slipped slightly from 20.6% in May to 20.5% in June.
“With the exception of credit unions, the approval rates for all categories of lenders inched higher last month,” Biz2Credit CEO Rohit Arora, said. “We are nowhere near pre-pandemic approval percentages, however. Still, these are positive signs.”
“While the cost of capital for small businesses is rising because most small business funding comes at variable rates, borrowers need capital for growth,” Arora said. “Fortunately, they can find it at a variety of lending sources.”
Total nonfarm payroll employment rose by 372,000 in June, higher than many economists expected, while the unemployment rate remained at 3.6%, according to the Jobs Report released by the U.S. Bureau of Labor Statistics released on Friday, July 8, 2022. Notable job gains occurred in professional and business services, leisure and hospitality, and health care. Many of these jobs are created by small businesses.
“With unemployment so low, small business owners are still struggling to find workers. This, naturally, is driving up the cost of labor as demand outweighs supply,” Arora said. “Rising labor costs, combined with 8.6% inflation in May 2022, continues to put a financial crunch on small companies.”
Biz2Credit analyzed loan requests from companies in business 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.