Business Loan Approvals Stall Again in May: Biz2Credit Small Business Lending Index™
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Total nonfarm payroll employment increased by 339,000 in May, and the unemployment rate rose by 0.3 percentage point to 3.7%, according to the Jobs Report released by the Bureau of Labor Statistics on Friday, June 2, 2023. Job gains occurred in professional and business services, government, health care, construction, transportation and warehousing, and social assistance.
To determine its Small Business Lending Index, Biz2Credit analyzed loan requests from companies in operation for more than two years with credit scores above 680. The results are based on primary data submitted by more than 1,000 small business owners who applied for funding on Biz2Credit's platform. To view the May 2023 Index, click here.
“Bank lending is stalled right now. They are having a hard time getting new deposits, and when they do they have to pay higher interest rates to get deposits. The banks are getting hit on both sides of the equation, so they are not lending,” said Rohit Arora, CEO of Biz2Credit and one of the nation’s leading experts in small business finance. “Many banks became complacent about lending and have high cost structures. They need to become more efficient and get back on their game.
“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.”
“It is a tough time for small business borrowers,” Arora said. “Right now, SBA loans are the best bet from banks. However, the rates on 7(a) loans are about 12% right now, and they take up to two months to get processed. Businesses that need money quickly are searching online and turning to alternative lenders.”
