According to the latest Biz2Credit‘s Small Business Lending Index, small business loan approval percentages at big banks slipped again in February, falling from 14.4% in January to 14.2%. This marks the ninth consecutive month in which big bank approval percentages have declined. Meanwhile, approval rates of business loan applications at small banks also dropped in February to 21.3%, down one-tenth of a percent from 21.4% in January.
Among non-bank lenders, approval rates of alternative lenders were up slightly from 27.8% in January to 27.9% in February. Similarly, institutional lenders granted 26.3% of funding requests in February, an increase from 26.1% in January.
Small business lending approval rates at credit unions declined again. In February, credit unions approved 20% of applications, down one-tenth of a percentage from January, marking the second-worst performance for credit unions since Biz2Credit began monitoring approval rates in January 2011. Only April 2020, during the the height of the COVID-19 lockdowns, had a lower figure (18.1%).
“February was not a great month for small business borrowers, and given the fallout from the collapse of Silicon Valley Bank, my fear is that it will be even harder for companies to secure capital,” Rohit Arora, CEO of Biz2Credit, said. “Lending at big banks, which are the most financially stable institutions, has stalled for months. Given what has happened of late, small banks are going to be cautious in lending. There is a real danger that small businesses are about to experience a credit crunch.
“Fed Chair Jerome Powell had signaled the likelihood of another hike in March, but that seems more difficult to do, given recent events. The high cost of capital, combined with stingy lenders, is a bad combination for small business borrowers.”
Like this story? Begin each business day with news you need to know! Register now for FREE Daily E-News Broadcast and start YOUR day informed!