Loan approval rates from all types of lenders are slowly rising, according to the Biz2Credit Small Business Lending Index for December 2021.
Institutional lenders, large banks, small banks, credit unions and alternative lenders all saw modest growth in loan approvals from November 2021 to December 2021.
Alternative lenders saw the strongest growth, a modest gain from 25.8% in November to 26.1% in December.
Alternative lenders
Why have alternative lenders led the way in loan approvals?
“After the PPP, banking activity in small business lending has been slow,” said Rohit Arora, CEO of Biz2Credit. “However, with government lending programs ending and interest rates expected to rise, it will become more lucrative for banks to lend again.”
Big banks
Big banks (those with more than $10 billion in assets) edged up to a 14.3% approval rating from 14.2% in November.
The approval rating for small banks rose to 20.1% in December from 19.9% in November.
Is the growth of large and small banks encouraging? Yes and no. Although loan approval rates are slowly and steadily increasing with no decrease throughout the year, the increases pale in comparison to statistics from 2 years ago.
Arora pointed out that 2 years ago, big bank approvals were 28.2% while small bank approvals were 50.6%.
“Normality has not returned because the virus has not allowed it,” Arora said. “We thought with vaccination Covid would diminish as a problem, but that hasn’t happened.”
Institutional lenders
Institutional lenders saw their approval rate gradually increase from 24.8% in November to 24.9% in December.
Combined, institutional lenders and alternative lenders approved 51% of small business loan applications.
credit unions
Credit union loan approval rates remained the same from November to December at 20.6%.
How Biz2Credit compiles the report
Biz2Credit analyzes loan applications from small businesses that have been in business for more than 2 years. To be included, small businesses also have a credit score of 680 points or higher. Biz2Credit compiles data from over 1,000 companies to prepare the report. For more information, visit Biz2Credit.com.
Image: Depositphotos
