Small business loan delinquencies increased in the first quarter of this year amid rising interest rates and ongoing inflation, according to the Consumer Bankers Association and Small Business Financial Exchange’s first quarter Small Business Lending Trends analysis.
New cards opened in the last year continue to have higher balances than previous years. Charge-offs increased for all account types for the second straight quarter, according to the report, following four quarters of rising delinquency. “Even with the increases, secured account types still continue to trend below pre-COVID levels, while unsecured loans remain consistent with pre-COVID performance,” according to the July 12 report.
Dollars at-risk due to past-due card accounts has increased more than 150 basis points since the first quarter of 2022, according to the report, as the Federal Reserve pushed its benchmark rate to between 5 and 5.25 percent from near-zero in March 2022. Credit utilization fell for the first time in nearly two years, according to the report.
“Account growth continues to hold steady, even with external economic pressures persisting,” the report stated. “The number of new accounts also remains strong, particularly for card products which typically provide the easiest and most flexible way for businesses to obtain capital.”
According to a recent Federal Reserve Bank of Kansas City survey of 130 commercial banks, credit standards tightened in the first quarter of this year as commercial and industrial lending dropped nearly 16 percent from a year ago. According to the report, small business loan balances dropped 7.6 percent from a year ago amid weakened loan demand.