The economy has hit another snag on its way to recovery, according to Biz2Credit. The May 2012 Biz2Credit Small Business Lending Index, released today, shows a drop in loans to small businesses from large banks.
"This is the third month in a row that big bank lending to small businesses dropped," said Rohit Arora, CEO of Biz2Credit. "Combined with another poor jobs report, continued jitters in Europe and uncertainty on Wall Street, the economy looks like it is slowing."
The findings
Loan approvals from big banks dropped from 10.6 percent to 10.2 percent in May. However, that was up from 9.8 percent a year ago.
Small bank lending approvals fell from 45.9 percent in April 2012 to 45.5 percent in May, up just 0.5 percent from May 2011.
However, lending approval from credit unions stood at 57.6 percent in May, up from 51.2 percent a year previous.
Alternate lenders upped their approval rate to 63.2 percent in May as small businesses were forced to look for sources other than large banks to meet their credit needs, according to the release.
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"Look for both Mitt Romney and President Obama to debate where the country is economically from now until Election Day," Arora said. "One thing cannot be denied: Lending for small businesses, which create the lion's share of new jobs, has stalled."
Biz2Credit arrived at its conclusions by analyzing 1,000 loan requests ranging from $25,000 to $3 million from companies that had been in business more than two years and that had an average credit score above 680.
Founded in 2007, Biz2Credit matches borrowers to financial institutions. Its network consists of 1.6 million users, more than 1,100 lenders, and credit rating agencies such as Equifax.
