April tends to bring showers to prep for May flowers but one firm reported that credit unions and banks experienced a slight drought in business loan approvals.
According to Biz2Credit, a New York firm that links lenders with small business owners, loan approvals made by credit unions decreased by 0.5% to 46.6% in April. Banks dropped from 10.9% in March to 10.6% in last month.
Biz2Credit tracked 1,000 loan applications and published the data in its small business lending index.
The firm also found that the 12-month window for the SBA's enhanced 90% loan guarantees recently came to an end, which slowed SBA lending activity reported by banks that make SBA-backed loans. The guarantee fee, which is usually 1% to 3% of the loan amount, was no longer waived and increased the cost of taking out a loan, according to Biz2Credit.
Rohit Arora, CEO of Biz2Credit, said another factor that may have led to a slowdown in business loan approvals was the April jobs report, which showed that only 115,000 new jobs were created last month.
High oil prices, the European crisis and a slowdown in the flow of capital have also combined to cause both borrowers and lenders to proceed with caution, Arora noted.