Stock Market Volatility Leads to Drop in Loan Approvals at Banks, Credit Unions, According to Biz2Credit Small Business Lending IndexsuperscriptstartTMsuperscruptend for January 2016

Institutional Lenders and Alternative Lenders Capitalize on Slow Month for Mainstream Financial Institutions

Loan approval rates at both big banks and small banks dropped in January 2016, according to the Biz2Credit Small Business Lending IndexsuperscriptstartTMsuperscruptend, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. Additionally, loan approval percentages at credit unions fell to an all-time Index low. Meanwhile, institutional lenders and alternative lenders experienced an uptick in loan approval rates. "The turbulence in the stock market and plummeting oil prices in the last month have resulted in a level of uncertainty for lenders," who oversaw the research. "While the demand for small business loans held up, the approval standards tightened."

Big Banks

Big Banks

For the second time in six months, lending approval rates at big banks ($10 billion+ in assets) declined as they approved 22.7% of funding requests in January, down two-tenths of a percent from December 2015. However, a year-to-year comparison shows that lending approval rates are up 6.5%.

Aug 2018
26.5%
Sep 2018
26.7%

Monthly Comparison

Aug 2018
26.5%
Sep 2018
26.7%

Yearly Comparison

"Outside economic factors attributed to the drop in loan approvals at big banks last month."

Rohit Arora

Rohit Arora, Biz2Credit CEO

Economy

one of the nation's leading experts on small business finance. "When there is uncertainty in the market, mainstream lending institutions are less inclined to take risks on loans."

Rohit Arora

Rohit Arora, Biz2Credit CEO

Small Banks

Small Banks

Lending approval rates at small banks dropped slightly to 49% in January, from 49.1% in December.

Jul 2018
49.7%
Aug 2018
49.8%

Monthly Comparison

Aug 2017
49%
Aug 2018
49.8%

Yearly Comparison

"Small banks have been slow to adapt to technological innovations to streamline the loan application process, so they are receiving requests from lesser-quality borrowers. This is hindering them from approving more loans."

Rohit Arora

Rohit Arora, Biz2Credit CEO

Institutional lenders

Institutional lenders

Lending approval rates at institutional lenders experienced a slight uptick in January, improving 62.6% from 62.5% in December. Since introduced as a category of lenders to the Index in 2014, institutional lenders have yet to experience a setback month.

Jul 2018
64.8%
Aug 2018
64.9%

Monthly Comparison

Jul 2018
63.9%
Aug 2018
64.9%

Yearly Comparison

"Institutional lenders are doing a great job at minimizing the risks of borrowing requests through advanced algorithms," said Arora. "In recent months, we are seeing more international funds enter the game seeking higher yields from investments. With growing uncertainty in global emerging markets, I expect this to remain a popular commodity for both investors and borrowers."

Rohit Arora

Rohit Arora, Biz2Credit CEO

Alternative lenders

Alternative lenders

Loan approval rates at alternative lenders remained improved in January to 60.8%, up one-tenth of a percent from a previous all-time low. Alternative lenders' approval percentages have steadily declined since January 2014, coinciding with the emergence of institutional lenders in the small business lending marketplace.

Jul 2018
56.5%
Aug 2018
56.6%

Monthly Comparison

Aug 2017
57.1%
Aug 2018
56.6%

Yearly Comparison

"While lending approvals dropped at the mainstream lenders, alternative lenders picked up the slack," Arora suggested. "Alternative lenders typically offer more expensive loan products, so they are often one of the last choices for borrowers."

Rohit Arora

Rohit Arora, Biz2Credit CEO

Credit unions

Credit unions

Credit unions approved 42.2% of loan applications in January - an all-time Index low - down from 42.3% the month prior.

Jul 2018
40.3%
Aug 2018
40.2%

Monthly Comparison

Aug 2017
40.3%
Aug 2018
40.2%

Yearly Comparison

"Credit unions are faltering because of their inability to adapt to technological advancements in the industry," said Arora. "Borrowers seek speed and convenience; many credit unions are lacking in the digital department. This has resulted in a decrease in applications from credit-worthy borrowers."

Rohit Arora

Rohit Arora, Biz2Credit CEO

View Past Months

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June 2019

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May 2019

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April 2019

Small Business Loan Approvals at Banks Jumped Again in April Biz2Credit Small Business Lending IndexTM

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March 2019

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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.