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FICO Survey Finds Credit Spigot Opening For Small Businesses

[ 0 ] Apr. 23, 2013 | SBO Editor

Lenders expect credit supply for small businesses to meet demand, approval rate on loan applications to increase, and loan delinquencies to drop

FICO (NYSE:FICO), a leading predictive analytics and decision management software company, released results from its quarterly survey of U.S. bank risk managers this week that reveal an optimistic forecast for small business lending. Sixty-two percent 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 or increase.

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

“This quarter’s survey was positive overall, but the results for small business lending were particularly striking,” said Dr. Andrew Jennings, FICO’s chief analytics officer and head of FICO Labs. “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.”

Supply and Demand for Small Business Credit Seen Increasing
More than 70 percent of respondents believe the amount of credit requested by small businesses will increase over the next six months. This would be a change in the recent trend — FDIC data has shown lackluster demand for credit by small businesses over the past three years.

A majority of respondents (52 percent) also expect the aggregate 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.

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Category: Features