Small business lending remains stable despite pandemic-era challenges, according to the Consumer Bankers Association and Small Business Financial Exchange’s first quarter lending trends report.
“Delinquency continues to trend lower than normal with funding sources such as PPP still having a moderating effect,” states the July 6 report. “In addition, higher than normal new account growth appears to be keeping delinquencies low.”
According to the report, new account bookings have again risen above pre-pandemic levels for several reasons, including small businesses beginning to need funding for current operations; small business owner concerns that credit could become harder to secure in the near future; delayed demand after small business owners funded operations from alternative sources for an extended period; and new business starts remaining above average and requiring initial capital or funding for growth.
Charge-off figures, which are considered similar to pre-pandemic numbers, continued to decline in the first quarter with slight increases in some accounts. The Small Business Financial Exchange trade association expects delinquency percentages will increase later this year as the impact of PPP and other initiatives falls and high inflation continues; the Federal Reserve potentially raises interest rates to curb inflation; and wages continue to rise.
The report was released approximately two months after the Federal Reserve Bank of Kansas City’s Small Business Lending Survey revealed that small business commercial and industrial lending had fallen nearly 27 percent since the end of 2020 due to the end of the Paycheck Protection Program and a reduction in SBA-guaranteed loans. New small business C&I loan balances spiked approximately 38 percent as financing shifted from term loans inflated by PPP to credit lines, wrote the survey authors, KC Fed Assistant Vice President Dustyn DeSpain and Senior Analyst Thomas Hobson.