Credit Supply and Approval Rate on Small Business Loans Expected to Increase

The results from FICO’s quarterly survey of U.S. bank risk managers revealed an optimistic outlook for small business lending.

62% of respondents said the supply of credit for small business loans in the next six months would satisfy demand, and 89 percent said the approval rate for small business loans would hold steady.

The Professional Risk Managers’ International Association (PRMIA) conducted the survey for FICO and also found that 79 percent of respondents believe that the delinquency rate on small business loans would remain flat during the next six months. This was one of the most optimistic forecasts for small business lending in the survey’s three-year history.

“In the past, the banking professionals we survey haven’t been as optimistic about credit for small businesses as they have been for other types of lending. The upbeat sentiment makes me think it’s possible that we’ll see small businesses picking up the pace of investing and hiring in the months ahead,” said Dr.Andrew Jennings , FICO’s chief analytics officer and head of FICO Labs.

More than 70 percent of respondents believe the amount of credit requested by small businesses will increase over the next six months. They also expect the total amount of credit extended to small businesses to increase during the next six months, while just 10 percent expect there to be a decrease in the credit extended to small businesses. Those figures were 42 percent and 15 percent, respectively, in last quarter’s survey.