New Small Business Lending is Up at Mid-Sized and Large Banks
April 24, 2024
Delaney Sexton
Contributing Editor
New Small Business Lending is Up at Mid-Sized and Large Banks
Continuing from yesterday, the Federal Reserve Bank of Kansas City reported that new lending and interest rates primarily increased, but small banks reported a decrease in new small business lending. These are the facts:
Outstanding small business C&I loan balances increased by 2.4% compared to the fourth quarter of 2022. Year-over-year, the number of C&I loans decreased by 2.2%, and total loans increased by 0.5%. Quarter-over-quarter, small business loans decreased by 0.9%, and C&I loans decreased by 1.2%. The Federal Reserve Bank found that this was the first quarter-over-quarter decline for all loan categories since the third quarter of 2021.
Regarding new small business lending, small business loan balances increased by 9.3% quarter-over-quarter. There was a 5.7% increase in new term loans and a 14.2% increase in new credit lines. Small banks reported a decline in new small business lending, but mid-sized and large banks reported increases in new small business lending.
For most new small business term loans during the fourth quarter of 2023, median interest rates were higher. The highest reported interest rate (8.9%) was for variable rate loans offered at urban banks, but this was a minor improvement from the third quarter of 2023. The lowest reported rates were for fixed rate loans at urban and rural banks, with both having an interest rate of 8%.
For the third quarter in a row, usage of small business credit lines was up. Variable rate lines made up about 89% of total credit line usage. Median interest rates on new lines of credit decreased at rural banks. On the other hand, rates at urban banks increased. The highest rate for variable lines of credit reached 9.1% at urban banks, and the lowest rates were the fixed rates at urban banks, which came in at 7.7%.