Business Loan Approvals by Banks Decline

Approvals by big banks for small business loans continue to decline.

According to Biz2Credit’s periodic survey of SME lending, loan approval percentages at big banks dipped from 13.5% in April to 13.4% in May. At the same time, approval ratings at small banks remained at 18.7%.

Rohit Arora, CEO of Biz2Credit, says that bank lending has stalled and banks are having a difficult time getting new deposits, needing to increase rates paid to accounts. Arora says that banks are not lending adding that many banks became complacent about lending and suffer from high cost structures.

At the same time, approval percentages at non-traditional lenders rose slightly last month.

Institutional investors’ approval rates increased from 26.7% in April to 26.9% in May, while alternative lenders improved from 28.7% in April to 28.9% in May. Credit unions were stagnant at 18.9%.

Arora says that if you need get a loan quickly, online and alternative lenders are a better option.

“With high employment, rising oil prices, and persistent inflation, there is a good chance that the Fed will once again hike interest rates another 25 bps in June or perhaps they will wait until July,” Arora said. “We can expect that the cost of capital will continue to rise for small business borrowers.”

 



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