Small business loan approval rates are climbing, but not fast enough

Loan approval rates continue to rise slowly, but not fast enough, according to the Biz2Credit Loan Index, published on April 12. “Small business lending hasn’t fully recovered,” said Rohit Arora, CEO of Biz2Credit. “This is disappointing news for companies looking to grow their businesses.”

The report includes loan approval rates through March 2022. Although approval rates are increasing, they are increasing gradually, barely a tenth of a percentage each month.

Biz2Credit April Small Business Loan Index

Supply chain issues impact loan timing, Arora said, “Small businesses sometimes have to borrow money when inventory is available,” he said. “And buy more than they would typically need to hedge against shortages.”

Arora added that he doesn’t see the lending/needs timing issue ending until the supply chain issues ease, which is “very difficult for small businesses.”

Big banks

Big banks (those with more than $10 billion in assets) achieved an approval rating of 14.9% in March, down from 14.7 in February and 14.5% in January.

Two years ago, loan approval rates for major banks were 28.3%.

Small banks

The approval rating for small banks rose to 20.6% in March from 20.5% in February. Two years ago, the loan approval rate for small banks was 50%.

Institutional lenders

Institutional lenders saw their approval rate gradually increase from 25.1% in January, 25.2% in February to 25.3% in March.

Two years ago, the lending rate for institutional lenders was 66.5%.

Alternative lenders

Approval rates for alternative lenders fell from 26.5% in February to 26.6% in March. Two years ago, the loan approval rate for alternative lenders was 55.9%.

credit unions

Credit union loan approval rates, which had been flat for two months (20.7%), fell slightly to 20.6%. Two years ago, the credit union loan approval rate was 39.6%.

How Biz2Credit compiles the report

Biz2Credit analyzes loan applications from companies that have been in business for more than 2 years and also have a credit score of 680 points or higher. Biz2Credit compiles data from over 1,000 companies to prepare the report.

Image: biz2credit