Small Business Loan Approval Rates End Year on High Note at Big Banks and Institutional Lenders, According to Biz2Credit's December Small Business Lending IndexsuperscriptstartTMsuperscruptend
Optimism for Continued Growth in Loan Approval Percentages as New Year Begins
Approval rates at institutional lenders and big banks improved to new post-recession highs in December 2015, according to today's Biz2Credit's December Small Business Lending IndexsuperscriptstartTMsuperscruptend , an analysis of more than 1,000 small business loan applications on Biz2Credit.com. As the U.S. economy has steadily improved, big banks and institutional lenders are more frequently granting loan requests. Additionally, small banks saw an increase in December loan approval rates in what has been an up-and-down year. Meanwhile, loan approvals at credit unions and alternative lenders continued to slow despite encouraging developments in the economy.
Big Banks
Big banks ($10 billion+ in assets) approved 22.9% of small business loan approvals in December, an increase by one-tenth of a percent in November.
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"The big banks have maintained their aggressive approach to lending to small businesses and with the adoption of the Federal Reserve's interest rate hike, I expect they will be even hungrier to grant loan requests,", one of the nation's leading experts in small business finance. "The adoption of technological advancements on the digital platforms of big banks has streamlined the loan application process and has resulted in lower chances of loans defaulting, thus increasing profitability and a higher volume of loan approvals."
Rohit Arora, Biz2Credit CEO
Small Banks
Lending approval rates at small banks improved to 49.1% in December, from 48.9% in November.
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"Small banks are approving more small business loans under the SBA loan program, which reduces the risk assumed by lenders," added Arora. "These are low-risk, low-reward types of loans and have resulted in the increase in loan approvals over the last month."
Rohit Arora, Biz2Credit CEO
Institutional lenders
Lending approval rates at institutional lenders experienced a slight uptick in December, improving 62.5% from 62.4% in November.
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"We are seeing increasing interest from international funds seeking higher yield investments," said Biz2Credit CEO Rohit Arora, who oversaw the research. "Institutional lenders have reduced the risks on these types of investments through digital algorithms that have automated the loan approval process and global investments are becoming more mainstream. With the weakening of emerging markets and strong value of the U.S. dollar, we are anticipating more international funds to enter the small business finance mix."
Rohit Arora, Biz2Credit CEO
Alternative lenders
Loan approval rates at alternative lenders remained unchanged in December, sitting at 60.7%, their lowest rate since August 2011. Alternative lenders' approval percentages have steadily declined since January 2014, coinciding with the emergence of institutional lenders in the small business lending marketplace.
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"Alternative lenders are under increased pressure to offer financial products at lower prices," Arora suggested. "They've struggled to adapt and this has translated to the gradually decline in loan approval rates."
Rohit Arora, Biz2Credit CEO
Credit unions
Credit unions approved 42.3% of loan applications in December - an all-time Index low - down from 42.4% in November.
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"Credit unions are losing market share and higher credit-quality borrowers due to their failure to adequately adapt to the technological advancements in the industry," said Arora. "Borrowers seek speed and convenience; many credit unions are lacking in the digital department and this has resulted in their decline in popularity."
Rohit Arora, Biz2Credit CEO
View Past Months
Access Archives
| February 2021 |
Biz2Credit Small Business Lending Index™ Finds Loan Approval Rates in February 2021 Changed Little from January, But Dropped Dramatically from February 2020 |
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As Small Business Businesses Apply for PPP Funding, Approval Percentages for Traditional Loans Plummet |
| View Report |
| January 2021 |
Biz2Credit Small Business Lending Index™ Reports Loan Approval Rates at Banks Increased Slightly in January 2021, But Are Down More Than 50% from One Year Ago |
| View Report |
| December 2020 |
Biz2Credit Small Business Lending Index™ Reports Loan Approval Rates at Banks Declined in December 2020, Are Down More Than 50 Percent from One Year Ago |
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Approval percentages for all categories of lenders dropped more than 50% from December 2019 |
| View Report |
| November 2020 |
Biz2Credit Small Business Lending Index™ Reports Loan Approval Rates at Banks Declined in November 2020, Are Down More Than 50 Percent from One Year Ago |
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Approval percentages are down 50% or more for all categories of small business lenders as the pandemic surges |
| View Report |
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.