Small business loan approval rates at big banks (more than $10 billion in assets) increased from 14.2% in November to 14.3% in December, and approval rates at small banks (under $10 billion in assets) rose from 19.9% in November to 20.1% in December, according to the latest Biz2Credit Small Business Lending Index.

Among several categories of non-bank lenders, approval percentages also climbed, as institutional lenders approved 24.9% of funding requests in December, up one-tenth of a percent from 24.8% in November, while alternative lenders’ approval rates rose from 25.8% in November to 26.1% in December. Credit unions approved 20.6% in December, which was the same percentage as in the previous two months.

Two years ago, bank approval percentages were about double what they are today. Big banks approved 28.2% of loan requests, while small banks approved 50.6% of loan requests in December 2019. Non-bank lender percentages in 2019 were even higher, as institutional lenders approved nearly two-thirds (66.2%) of applications, alternative lenders approved 56.3% and credit unions approved 39.7%.

“Banks and most non-bank lenders alike saw their loan approval percentages rise in December, with the exception of credit unions, which were stagnant,” Rohit Arora, CEO of Biz2Credit, said. “Approval percentages are rising slower than expected. Loan approval rates remain far below pre-COVID approval levels of December 2019, just two years ago.

“After PPP, bank activity in small business lending has been slow. However, in 2022, with government lending programs ending and interest rates expected to rise, it will become more lucrative for banks to lend again. Activity should pick up this year.

“Markets don’t like uncertainty, and with the pandemic taking unpredictable turns, uncertainty persists right now. Normalcy has not returned yet because the virus hasn’t allowed it. We thought with vaccination that COVID would lessen as a problem, but that didn’t happen. We didn’t expect the small business economy to stall for so long, and we certainly did not predict the inflation we are seeing.”

Arora said that some types of businesses are doing well, including IT, financial services and anything that does not require a lot of human interfacing. Meanwhile, he said restaurants, hotels, entertainment venues and the cruise industry are still struggling and will likely do so until the pandemic gets under control.

Biz2Credit analyzed loan requests from companies in business more than two years with credit scores greater than 680 for the index. The results are based on primary data submitted by more than 1,000 small business owners who applied for funding on Biz2Credit’s platform.