Biz2Credit Small Business Lending Index for May 2013 Reports 70 Percent Increase in Big Bank Loan Approvals Over the Past 12 Months
Monthly Index Reports All-Time Index High in Approval Rates by Big Banks; Approvals at Small Banks, Alternative Lenders and Credit Unions Drop
NEW YORK, NY, June 12, 2013 - Small business loan approvals at big banks rose to a new high of 17.3%, according to the Biz2Credit Small Business Lending Index, a monthly analysis of 1,000 loan applications on Biz2Credit.com.
Further, loan approvals at big banks experienced increased in five of the last six months. More importantly, in a year-to-year comparison, the Index finds small business lending approvals at big banks are up 70 percent over the figure from last May 2012.
"The jump in approvals at big banks is a product of their heavy investments in technology to improve the method of processing loan applications. A number of big banks putting a lot of money into upgrading their small business loan process with the technological innovations that increase the speed and service of approvals," said Biz2Credit CEO Rohit Arora, who oversaw the research.
Arora sees the gradually improving economy and lending conditions as the driving forces in the increase in small business loan approvals at big banks. "We are seeing higher credit-quality customers apply for loans at big banks. Meanwhile, the banks are increasing their customer service, " he added.
Loan approvals at small banks dropped for the first time in six months. Small business loan approvals in April 2013 were previously at an all-time index high of 50.9% before dipping to 49.5% in May 2013. However, a year-to-year comparison indicates approvals are still up about ten percent from last year's figures.
"Although small banks continue to be aggressive players in small business lending, they are beginning to feel heat from the competition of big banks. Small banks must continue to invest in technology to stay ahead of the game. Otherwise big banks will take over," suggested Arora, one of the nation's leading experts in small business finance. "Big banks often offer better rates than small banks and pricing is one of the many deciding-variables, so it is essential that small banks remain diligent in keeping up with technological advances and process loans quicker."
Credit union approvals of small business loans continue to plummet, dropping to 45.0% from 45.2% in April 2013. Loan approvals continue to set all-time Index lows for credit unions. Credit unions are still restricted by an MBL cap of 12.25% of assets and continue to lag behind in technology in comparison to their competition. Debate over lifting the cap continues in Washington.
"The return of big banks to the small business credit market further threatens credit unions," Arora explained. "Lengthy processes to obtain loans at credit unions are often a large deterrent for customers, which have influenced the movement in higher credit-quality customers electing other lending platforms as their primary option."
Small business loan approvals by alternative lenders - accounts receivable financers, merchant cash advance lenders, Community Development Financial Institutions (CDFI), microlenders, and others - decreased slightly to 63.3% from the 63.4%rate in April 2013.
Lenders Approval %
About the Biz2Credit Small Business Lending Index
Biz2Credit analyzed loan requests ranging from $25,000 to $3 million from companies in business more than two years with an average credit score above 680. Unlike other surveys, the results are based on primary data submitted by more than 1,000 small business owners who applied for funding on Biz2Credit's online lending platform, which connects business borrowers with more than 1,100 lenders nationwide.
Founded in 2007, Biz2Credit Business Loans is a leading credit marketplace connecting small- and medium-sized businesses with lenders, service providers, and complementary business tools. Using the latest technology, Biz2Credit matches borrowers to financial institutions based on each business's unique profile -- completed in less than four minutes -- in a safe, efficient, price-transparent environment. Biz2Credit's network consists of 1.6 million users, 1,100+ lenders, credit rating agencies such as D&B and Equifax, and small business service providers including CPAs and lawyers.
Having arranged $800 million in funding throughout the U.S., Biz2Credit is widely recognized as the #1 online credit resource for small business loans, lines of credit, equipment loans, working capital and other funding options.Visit www.biz2credit.com, follow on Twitter @Biz2Credit, and "Like Us" on Facebook at www.facebook.com/biz2credit.