Small business loan approval rates drop at big banks in August, improve for smaller banks

According to the latest Biz2Credit Small Business Lending Index, small business loan approval percentages at large banks (over $10 billion in assets) fell from 15.3% in July to 15.1% in August, but increased at smaller banks, from 21.2% in July to 21.4% in August.

Approval percentages improved slightly among institutional lenders and alternative lenders, while loan approvals from credit unions fell:

  • Institutional lenders approved 25.9% of loan applications in August, a slight increase from 25.8% in July. Approvals in this lending category have steadily increased in 2022.
  • Approval rates for alternative lenders rose from 27.2% in July to 27.3% in August.
  • Credit unions fell again, from 20.4% in July to 20.3% in August.

“General conditions are getting tighter and big banks are taking more provisions now,” said Rohit Arora, CEO and co-founder of Biz2Credit. “As smaller banks are more active in SBA lending, their approval rates are still high as demand for government guaranteed products is high.

“Inflation is hitting small businesses hard because the cost of their inputs has gone up. Thus, they need more working capital. Additionally, labor shortages have forced companies to do more with less. Since their level of automation is lower than that of large enterprises, higher labor and material costs affect smaller enterprises more. “Another source of concern is that consumer spending is shifting more towards essential goods and services, rather than luxury and travel, so I expect a further drop in loan approvals in the fall.