Report: Lending climate tightens — again
Small-business lenders optimistic about rest of 2024
Some industries tied to heavy equipment felt the strain of tightened lending standards in the first quarter while others showcased resilience.
The Lendio lending index dropped to 62 in Q1 from 63 in Q4 2023, indicating “moderately limited” lending conditions. Utah-based Lendio, an online loan marketplace, provides quarterly reports based on small and medium-sized businesses’ access to financing. The company compiled surveyed responses from 25 lenders and 2,000 small businesses to help determine its Q1 index.
Lending criteria, based on credit score, revenue and time in business, became more stringent in Q1, prolonging a trend set in motion by the Federal Reserve’s interest rate hikes in 2022 and 2023. The required credit score increased by an average of 1.08% in Q1, average monthly revenue rose 2.35% and time in business rose 0.1%.
Improvement coming?
Of the 25 small-business lenders that participated in the survey, just over 40% anticipate lending criteria to widen over the next six months. Roughly 80% anticipate loan volume to increase over the next six months, while 20% expect loan volume to stay the same.
An improved forecast of lending conditions can be attributed to easing inflation and the Fed’s anticipated reduction of rates later this year. Lenders remain cautiously optimistic, the report stated.
Ag, construction take hit; trucking sees upswing
Lendio’s index for the agriculture and forestry sector fell to 59 in Q1 from 61 in Q4, while construction dropped to 60 from 61. Both sectors had “below average access” to financing, according to the report.
The freight trucking index, conversely, jumped to 70 from 69, suggesting above-average access to financing. Of the respondents, 43% said that small trucking businesses had adequate access to capital.
The e-commerce sector, which contributes to the trucking industry’s success, saw a 2-point increase to 66 in Q1, with above-average financing access.
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