The Biz2Credit Small Business Lending Index for December 2021 shows a gradual increase in loan approval rates across all types of lenders. This includes Institutional Lenders, Big Banks, Small Banks, Credit Unions, and Alternative Lenders. The most significant growth was seen in Alternative Lenders, with a slight increase from 25.8% in November to 26.1% in December.
So, why are Alternative Lenders leading the pack? According to Rohit Arora, Biz2Credit CEO, bank activity in small business lending has been slow after the PPP. But with government lending programs wrapping up and interest rates likely to rise, banks might find it more profitable to start lending again.
Big Banks, those with assets over $10 billion, saw a small rise in approval ratings, going from 14.2% in November to 14.3% in December. Small Banks also experienced growth, with approval ratings increasing from 19.9% in November to 20.1% in December.
While it’s encouraging to see growth in both Big and Small Banks, it’s a mixed bag. Yes, loan approval rates are slowly but steadily growing, with no decreases throughout the year. However, these increases are still small compared to stats from two years ago. For instance, Big Bank approvals were at 28.2% and Small Bank approvals were at 50.6% two years ago. Arora attributes this to the ongoing impact of the virus, which has prevented a return to normalcy.
Institutional Lenders also saw a slight increase in approval rates, from 24.8% in November to 24.9% in December. Combined, Institutional Lenders and Alternative Lenders approved 51% of small business loan applications.
Meanwhile, Credit Union loan approval rates remained steady from November to December, at 20.6%.
Biz2Credit compiles this report by analyzing loan requests from small businesses that have been in operation for more than two years and have a credit rating of 680 points or higher. The data is gathered from over 1,000 businesses.
