The availability of credit for small businesses has been a concern throughout the economic recovery. Our latest quarterly survey of US bank risk managers indicates we may be turning a corner. Not only are the bankers we surveyed generally optimistic about the credit market, they are expecting the credit situation to improve significantly for small business borrowers.
Nearly 2/3 of respondents (62%) said the supply of credit for small business loans would satisfy demand in the upcoming six months, and 89% said the approval rate for small business loans would hold steady or increase. Our survey also found that 79% of respondents believe the delinquency rate on small business loans would remain flat or decrease during the next six months.
This is arguably the most optimistic forecast for small business lending we’ve ever seen in our survey’s three-year history.
Moreover, 70% of respondents believe the amount of credit requested by small businesses will increase over the next six months. If this proves true, it would be a marked change in a recent trend—FDIC data has shown lackluster demand for credit by small businesses over the past three years.
In addition, a majority of respondents (52%) expect the aggregate amount of credit extended to small businesses to increase during the next six months, while just 10% expect there to be a decrease in the credit extended to small businesses. Those figures were 42% and 15%, respectively, in last quarter’s survey.
The upbeat sentiment reflected in our latest results makes me think it’s possible that we’ll see small businesses picking up the pace of investing and hiring in the months ahead.
This outlook is much more positive than the results of our survey of European credit risk managers, released earlier this month. Only 41% of European bankers surveyed believed that small businesses would request more credit, and just 29% expected an increase in the amount of credit granted to small businesses due to lingering economic issues across Europe.