Small business loan approval rates continue to climb
Loan approval rates from all types of lenders continue to rise in very small increments, according to the Biz2Credit Small Business Lending Index released Feb. 8.
the report includes loan approval rates through January 2022. While approval rates are increasing, they are increasing in the same slow growth pattern that has existed for over a year.
Approval rates are only slightly higher than a year ago, and half as high as 2 years ago.
Rohit Arora, CEO of Biz2Credit, said loan approval rates were growing much slower than expected.
“Loan approval rates are still well below January 2020 pre-Covid approval levels,” Arora said.
Arora added that the slow rise could be related to interest rates.
Small business loan approvals continue to rise
Lenders prefer to approve loans when interest rates are high. Borrowers prefer to borrow money when interest rates are low.
What’s going to happen ? Will lenders and borrowers find common ground?
“An expected increase in the Federal Reserve’s interest rate could cause them (lenders) to open the purse strings a little more,” Arora said.
February Biz2Credit Small Business Loan Index
Here’s a look at the small business loan approval rates of all types of lenders, compared year over year:
Big banks (those with more than $10 billion in assets) achieved an approval rating of 14.5% in January, down from 14.3% in December.
- January 2021 – 13.2%
- January 2020 – 28.3%
The approval rating for small banks rose to 20.3% in December from 20.1 in December.
- January 2021 – 18.3%
- January 2020 – 50.4%
Institutional lenders saw their approval rate gradually increase from 24.9 in December to 25.1 in January.
- January 2021 – 23.0%
- January 2020 – 66.4%
Alternative lender approval rates fell from 26.1% to 26.3% from December to January.
- January 2021 – 23.7%
- January 2020 – 56.1%
Credit union loan approval rates rose 1% from 20.6 in December to 20.7 in January. November to December, at 20.6%.
- January 2021 – 20.5%
- January 2020 – 39.6%