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Small Business Loan Demand Remains Strong, Lenders Become More Efficient

This Month in Retail Banking

Small businesses continue to demonstrate a need for cash, with demand for lending products increasing by nearly 40% year over year, according to the Curinos LendersBenchmark for Small Business Lending Originations consortium.  Much of this growth in demand resides in unsecured lines of credit, which comprises more than 50% of the total market volume.  

In an effort to mitigate additional economic risk, small-business lenders are slowly making conservative shifts to their credit box, increasing loan originations in the 680+ personal credit score buckets by approximately 500 basis points year over year. At the same time, they are moving away from the lower credit buckets.   

While cycle times have remained static at approximately 20 calendar days for unsecured lines of credit year over year, they have decreased by approximately 10% on secured products (from 63 calendar days to 57 days), reflecting an increased focus on operational efficiencies in 2022.  The unsecured loan is seeing even greater operational improvements, with average cycle times at 21 calendar days compared with the prior year average of 31 calendar days. 

Figure 1:
Small Business Lending Growth, 2022 vs. 2021

Source: Curinos Standard Rate Data, includes 1,349 banks as of Jan 4, '23.* Excludes online banks.
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