Business loan approval rates have increased – depending on who you are asking. According to a report, alternative lenders, institutional investors and small banks have increased credit but big banks and credit unions have pulled back
This is according to online lender Biz2Credit and its periodic Small Business Lending Index. The report claims that big bank lending dropped from 14.5% to 14.4%. On the other side, loan approvals at small banks increased to 21.4% from 21.2% in January.
Among non-bank lenders, approval rates increased from 27.6% in December to 27.8% in January. Institutional lenders approved 26.1% of funding requests last month, up from 25.9% in December.
In January, credit unions approved 20.1% of loan requests, down one-tenth of a percentage from December.
Rohit Arora, CEO of Biz2Credit, explained that companies that need working capital are choosing non-bank lenders; even though they may cost a bit more, the funding arrives much sooner. At the same time, Arora said that the cost of capital will continue to rise with borrowers not benefiting from a Fed pause any time soon.
The unemployment rate continues to be low at 3.4%, with job growth continuing – mainly from small businesses.
“The latest job figures are a mixed blessing for small business owners. While people are working and spending, it also means that inflation likely will linger for a longer period of time, and the Fed may continue to raise rates, which obviously makes it more expensive to borrow money,” said Arora.