Loan Approvals Decline, Indicate Economy Slowing Down
Loan Approvals Decline, Indicate Economy Slowing Down
According to Biz2Credit Small Business Lending Index, after evaluating 1,000 applications for loans, it was discovered that loan approvals at banks declined from 10.9 percent during the month of March to 10.6 percent during April, and also a decline from an approval rate of 11.6 percent during March 2011. Moreover, small bank lending declined from 47.6 percent during March to 45.9 percent during April.
On the other hand, loan approvals by credit unions also declined to 46.6 percent when they were proposing to raise the lending limit to 27.5 percent of their assets.
One other indication that the economy is slowing down is that, in general, the demand for small business loans for the month of April declined by 5.4 percent, which is a first for 2012.
The guarantee fee of 90 percent for loan approvals established between the months of September 2010 and March 2011 were applicable for one whole year. The month of April of this year was the first month of 75 percent guarantees along with evaluation of the 1 to 3 percent fee. This is one of the major causes for the decline in the loan demand and less enthusiasm of banks to approve funding applications.
The April jobs report showed that only 115,000 jobs were produced, even though the anticipated number is more than that. This can also mean a slowing economy. Moreover, increasing oil prices, together with the worsening of the crisis in Europe, have contributed to borrowers and lenders being much more careful.
Credit unions and alternative lenders, among all small business lenders, have approved above 50 percent of loan applications. Since the month of September last year, small bank lending declined to its lowest point. In contrast, big banks do not approve nearly 9 in 10 small business loan applications.
According to the evaluation by Biz2Credit, loan application amounts vary from $25,000 to $3 million and that the average credit score was more than 680.
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Filed under: Business Loans • Loans • loans for people with bad credit • refinance
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