Small Business Loan Approval Percentages Slip at Big Banks, Alternative Lenders See Uptick

Strategic Insights -

As inflation rates stabilize, the Federal Reserve may raise interest rates again, potentially making it more expensive for small businesses to borrow. Despite this, alternative lenders and institutional lenders are experiencing an increase in approvals, with rates rising from 25.9% in December to 26.1% in January. Meanwhile, big banks saw a slight decline in approval percentages, falling from 14.5% in December to 14.4% in January. Biz2Credit CEO Rohit Arora notes that the cost of capital for small businesses will continue to climb, making non-bank lenders a more attractive option for working capital.

Key Takeaways:

  • Big banks saw a slight decline in small business loan approval percentages, falling from 14.5% in December to 14.4% in January.
  • Alternative lenders experienced an increase in approvals, rising from 25.9% in December to 26.1% in January.
  • Institutional lenders also saw an uptick in approvals, with rates increasing from 25.9% in December to 26.1% in January.
  • Small business owners are turning to non-bank lenders for working capital due to the fast approval process and relatively lower rates.
  • The unemployment rate remains at 3.4%, with a surprising 517,000 jobs added in January 2023.
  • Credit unions saw a slight decline in approvals, with rates dropping from 20.1% in December to 20.0% in January.
  • Biz2Credit analyzed loan requests from companies with credit scores above 680 and in business for more than two years.
  • The results are based on primary data submitted by over 1,000 small business owners who applied for funding on Biz2Credit's platform.

Statistics:

  • 14.4%: Small business loan approval percent at big banks in January 2023.
  • 14.5%: Small business loan approval percent at big banks in December 2022.
  • 26.1%: Approval rate at institutional lenders in January 2023.
  • 25.9%: Approval rate at institutional lenders in December 2022.
  • 27.8%: Approval rate at alternative lenders in January 2023.
  • 27.6%: Approval rate at alternative lenders in December 2022.
  • 20.1%: Approval rate at credit unions in January 2023.
  • 20.0%: Approval rate at credit unions in December 2022.
  • 517,000: Jobs added in January 2023.
  • 3.4%: Unemployment rate as of February 3, 2023.

Sources:

  • Biz2Credit Small Business Lending Index
  • U.S. Bureau of Labor Statistics (Jobs Report)
  • GlobeNewswire
  • SyndiGate Media Inc. (Syndigate.info)