Small business loan approval rates rise at small banks, fall at large institutions in July

According to the latest Biz2Credit Small Business Loan Index, small business loan approval percentages at small banks fell from 21.1% in June to 21.2% in July, while large bank approvals (over $10 billion in assets) fell from 15.4% in June to 15.3% in July.

Among non-bank lenders, approval percentages improved slightly, while loan approvals from credit unions fell:

  • Institutional lenders approved 25.8% of loan applications in July, down from 25.6% in June. Approvals in this lending category have steadily increased in 2022.
  • Approval rates for alternative lenders fell from 27.1% in June to 27.2% in July.
  • Credit union approval rates rose from 20.5% in June to 20.4% in July.

“Big bank approvals fell slightly after months of steady increases. This is likely due to worries about a possible recession after the Federal Reserve raised interest rates by 75 basis points in an effort to control the economy. inflation,” said Rohit Aror, CEO of Biz2Credit. “Small banks, which process a lot of SBA loans, remain a good source of capital. For businesses that need cash faster, non-bank lenders remain a good option. Small business loans at credit unions continue to flounder. Fortunately, their approval percentages are about half of what they were just before the pandemic and have shown little growth this year.

Total non-farm payroll employment rose by 528,000 in July and the unemployment rate edged down to 3.5%, according to the jobs report released by the US Bureau of Labor Statistics on August 5. Job growth was broad-based, led by gains in leisure and hospitality, professional and business services, and health care. Total non-farm employment and the unemployment rate have returned to pre-pandemic levels in February 2020.

“Small business owners continue to have difficulty finding workers. The demand for labor is driving up wages, which is impacting the bottom line of many small businesses. Labor costs are usually a company’s largest expense,” Arora said. “Meanwhile, inflation remains high and is putting a financial crisis on small business owners.”