December 19, 2022
Main Street Monday – Lending Standards Tighten in the Last Half of 2022
“Many small business variables such as self-employment, proprietors’ income, loan delinquencies, and loan balances now have trends that resemble their pre-COVID-19 trends. However, even though the number of startups has recently increased, demand for loans by small firms had a quick and relatively deep decrease,” reads the Winter Economic Bulletin by the SBA Office of Advocacy.
Here are the facts about small business lending:
• Bank lending standards have tightened notably in the last year.
• Demand for commercial industrial loans has been strong throughout 2021 and 2022, but in the last quarter, loan demand has dropped significantly.
• Between June 2021 and June 2022, business lending rose 6.5%.
• Small business lending declined following the end of the Paycheck Protection Program and loan forgiveness.
• Commercial real estate and commercial industrial loan delinquency rates have “remained subdued” for the last few years.
• Commercial industrial loan delinquency rates have been slightly higher than commercial real estate loan delinquency rates since 2015.
• The number of loan applications per bank has returned to pre-pandemic levels in 2022.
• Loan approval rates for small business loans are also at a similar level as the rates were before the pandemic (around 2018 to early 2020).
• In 2022, self-employment topped the peak of self-employment from before the Great Recession.
• Annual proprietors’ income has been steadily rising for more than a decade and doubled since the Great Recession.
• Business/establishment openings have had historic spikes during the pandemic, though there has been a slight drop in 2022.
• Business closings spiked during the early pandemic but dropped quickly after that.
• From 2015 to 2022, small businesses created two-thirds of new jobs.
• In the first quarter of 2022, small businesses recovered nearly all the jobs lost during the second quarter of 2020 and the start of the COVID-19 pandemic.