Small Business Loan Approvals and Outstanding Balances Increase in Q1 2024

July 3, 2024

Delaney Sexton
Contributing Editor

Small Business Loan Approvals and Outstanding Balances Increase in Q1 2024

Small business loan approvals increased at small banks (up from 89% to 93%) and midsized banks (up from 66% to 73%) in the first quarter of 2024. At larger banks, loan approvals have stayed consistent with approval rates at 49%. When denying a loan, 71% of respondents reported that borrower financials were the most common reason.

Compared to the first quarter of 2023, outstanding small business loan balances increased by 4.4% while outstanding C&I loan balances decreased by 3.5%. The rise in small business loan balances can be credited to increases in variable rate loans. All loan categories were generally stable compared to last quarter.

Total new small business loan balances decreased by 6.3% from the last quarter of 2023 to the first quarter of 2024. Comparing current new small business loans to a year ago, total new loans decreased by 6.7%. Although small banks reported increases, that was outpaced by the decline in new small business loans at midsized and large banks.

The trend of weaker small business loan demand continued for yet another quarter, but there was some relief at larger banks. Large banks reported increased loan demand for the first time since the first quarter of 2022. Overall, 12% of banks responded that their bank was experiencing lower demand, the eighth consecutive quarter of lower loan demand at banks.

KC Federal Reserve Bank Small Business Lending Survey