Loan Approval Rates at Banks Improve in April 2016, While Alternative Lenders' Percentages Drop Significantly, According to Biz2Credit Small Business Lending IndexsuperscriptstartTMsuperscruptend for April 2016

Alternative Lenders, Credit Unions and Institutional Lenders Falter

Loan approval rates at both big banks ($10 billion+ in assets) and small banks thrived in April 2016, according to the latest Biz2Credit Small Business Lending IndexsuperscriptstartTMsuperscruptend, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. Meanwhile, approval percentages dropped significantly at alternative lenders. Institutional lenders and credit unions also experienced a slight drop in their loan approval rates in the last month.

Big Banks

Big Banks

Big banks ($10 billion+ in assets) approved 23.1% of loan applications in April, up one tenth of a percent in the last month and the highest approval percentage since the Index began more than five years ago. In fact, lending approval rates today are more than twice as high as they were in April 2011 during the so-called "credit crunch." Moreover, lending approval rates at big banks have improved in six of the last eight months.

Aug 2018
26.5%
Sep 2018
26.7%

Monthly Comparison

Aug 2018
26.5%
Sep 2018
26.7%

Yearly Comparison

"Big banks have been the tortoise while alternative lenders have been the hare. Their approval percentages have climbed slowly and steadily for several years."

Rohit Arora

Rohit Arora, Biz2Credit CEO

Economy

"As more banks continue to leverage technology, the risks of loan defaults are better identified. It also lowers their loan processing costs. This has resulted in an increase in the banks' willingness to lend."

Rohit Arora

Rohit Arora, Biz2Credit CEO

Small Banks

Small Banks

small banks Further, lending approval rates at small banks improved to 48.8% from 48.7% in March 2016.

Jul 2018
49.7%
Aug 2018
49.8%

Monthly Comparison

Aug 2017
49%
Aug 2018
49.8%

Yearly Comparison

"Small banks are still doing a lot of SBA loans, which are government-backed and thus are less risky to make". "From May onward, small bank approvals go up as companies that filed for tax filing extensions then can start borrowing for expansion, working capital and refinance."

Rohit Arora

Rohit Arora, Biz2Credit CEO

Institutional lenders

Institutional lenders

Lending approval rates at institutional lenders dropped for the first time in more than two years, albeit only slightly, to 62.7% in April from 62.8% in March. It marks the first drop for this category of lenders since Biz2Credit began monitoring the approval rates of institutional lenders in January 2014.

Jul 2018
64.8%
Aug 2018
64.9%

Monthly Comparison

Jul 2018
63.9%
Aug 2018
64.9%

Yearly Comparison

"Despite this small hiccup, institutional lenders should still be considered one of the strong driving forces in the industry". "The high yields in small business remain attractive, and I expect a rebound in the approval rates in coming months. There is little compliance risk in small business lending for them. It's an attractive asset class for them."

Rohit Arora

Rohit Arora, Biz2Credit CEO

Alternative lenders

Alternative lenders

Alternative lenders took a big hit in April, approving loans at a rate a half percentage point lower in the last month to 60.2%. This approval rate is down significantly from the category's Index-high of 67.3% two and a half years ago.

Jul 2018
56.5%
Aug 2018
56.6%

Monthly Comparison

Aug 2017
57.1%
Aug 2018
56.6%

Yearly Comparison

"We may be seeing a bit of a correction in the marketplace. Alternative lenders were willing to make riskier loans, but could afford defaults because their high interest rates reflected the volatility of the non-bank loan market". "As the banks keep making loans at attractive rates to higher quality borrowers, alternative lenders are losing out. They may soon become an afterthought for small business owners, especially those with good-standing credit who no longer have to borrow at any cost."

Rohit Arora

Rohit Arora, Biz2Credit CEO

Credit unions

Credit unions

Credit unions continue to deny an increasing percentage of loan requests, granting an all-time Index low of 41.9% in April, down one tenth of a percent from March. This marks the 11th consecutive month that loan approval rates have declined at credit unions.

Jul 2018
40.3%
Aug 2018
40.2%

Monthly Comparison

Aug 2017
40.3%
Aug 2018
40.2%

Yearly Comparison

"Credit unions are wavering in the small business finance space largely because of their inability to adapt to the technological advancements that competing categories of lenders are implementing". The lending cap still has not gone up. That continues to hurt credit unions. They are not as competitive as they were.

Rohit Arora

Rohit Arora, Biz2Credit CEO

View Past Months

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Aug 2019

Small Business Loan Approvals at Banks Continue to Reach New Heights, According to August 2019 Biz2Credit Small Business Lending Index™

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July 2019

Small Business Loan Approvals at Banks Hit Record Highs, According to July 2019 Biz2Credit Small Business Lending IndexTM

Alternative Lending Drops and Credit Unions Sink to a Record Low

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June 2019

Small Business Loan Approvals at Big Banks Hit Record Highs, According to June 2019 Biz2Credit Small Business Lending IndexTM

Big Banks, Regional and Community Banks, and Institutional Lenders Climb, While Alternative Lending Drops and Credit Unions Sink to New Low

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May 2019

Small Business Loan Approvals at Big Banks Stay at Record Post-Recession High, According to May 2019 Biz2Credit Small Business Lending IndexTM

Small Banks and Institutional Lenders Climb, Credit Union Lending Remains at Post-Recession Low, Alternative Lending Stalls Again

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About Biz2Credit Small Business Lending IndexTM

The Biz2Credit Small Business Lending IndexTM is an analysis of 1,000 monthly loan applications on the Biz2Credit website. The Index reports the loan approval rates of small business financing requests at Big Banks ($10 billion+ in assets), local and regional banks and non-bank lenders (credit unions, Community Development Financial Institutions (CDFI), micro lenders, and others).

Unlike other surveys, the results are based on primary data submitted by more than 1,000 entrepreneurs who applied for funding on Biz2Credit's online lending platform, which connects small business borrowers with sources of capital.

Results of the Biz2Credit Small Business Lending IndexTM have been reported by The Wall Street Journal, Bloomberg BusinessWeek, Entrepreneur.com, Bloomberg Radio's "The Hays Advantage", SBA Radio, NY Daily News, Crain's NY Business, Michigan Banker, and other media.