Small business loan approval percentages at big banks (more than $10 million in assets) rose from 15.1% in April to 15.3% in May, while approval rates at small banks (under $10 billion in assets) also increased, rising from 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 requests in May, up one-tenth of a percent from 25.4% in April.
- Alternative lenders’ approval rates rose 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 still trying to figure out their funding needs and must consider rising interest rates. With inflation, entrepreneurs need funding for growth,” Rohit Arora, CEO of Biz2Credit, said. “The cost of capital for small business borrowers will rise since most small business funding comes at variable rates. The continued incremental increase in loan approval percentages is encouraging. For the past year, it really has been a case of ‘slow and steady wins the race’.”
Arora also said the lending industry is closely watching what the SBA does, specifically whether the agency will approve financial technology companies to process SBA loans.
For the index, Biz2Credit analyzed loan requests from companies in business more than two years with credit scores greater than 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.