Small Business Lending Index January 2017 - Biz2Credit

Biz2Credit Small Business Lending IndexTM

January 2017


Small Biz Loan Approval Rates Improve to New All-Time Highs at Big Banks, According to Biz2Credit Small Business Lending IndexTM

Lending at Small Banks, Institutional Investors Remains Stagnant as Credit Unions Continue to Falter

Loan approval rates at big banks ($10 billion+ in assets) picked up where they left off in 2016, improving to post-recession highs in January 2017, according to the Biz2Credit Small Business Lending IndexTM, the monthly analysis of more than 1,000 small business loan applications on Alternative lenders also experienced an uptick in their loan approval rates in the last month. Additionally, loan approval rates at small banks and institutional investors remained stagnant while approval rates at credit unions dropped.

Big Banks

Small business loan approval rates at big banks improved to 24% in January 2017, marking the sixth consecutive month of increases for this category of lenders. Further, loan approval rates at big banks in a year-to-year comparison are up more than a full percentage point as it slowly creeps towards the one-quarter mark of approvals.

"Despite political turmoil, the market has responded fairly well since Donald Trump took over the White House. He has brought a business friendly approach," said Biz2Credit CEO Rohit Arora. "There is still a sense of optimism, especially in the banking sector, because of the prospect that Dodd Frank restrictions might be eased."

Small Banks

Loan approval rates at small banks remained stagnant at 48.9% and are near mirror images of its 49% mark in a year-to-year comparison. Although the rates didn't increase, January 2017 marked the fourth consecutive month that the category of lenders avoided a decrease.

"Dodd-Frank rules had a significant impact on small banks," explained Arora, one of the nation's leading experts in small business finance. "If the regulations are reduced, it could help spur lending by regional and community banks."

Institutional lenders

In addition, institutional lenders' loan approval rates remained at 63.4%. This ended a six-month streak of increases for this category of lenders.

"The Dow Jones crossed the milestone mark of 20,000 and optimism to invest in the U.S. is as strong as it has been for a while," suggested Arora. "I anticipate global institutional lenders will continue to seek high yields from investments in American small business loans."

Alternative Lenders

Loan approval rates bounced back considerably at alternative lenders in January, as they approved 58.5% of the funding requests they received, down one-tenth of a percent in a month-to-month comparison. In December 2016, alternative lending approval rates dropped by six-tenths of a percent.

"Advancements in technology by mainstream lenders has taken away the competitive advantage of processing loans quickly that alternative lenders long held," Arora explained. "Once-thriving alternative lenders such as CAN Capital have stopped lending, and smaller alternative lending companies are going out of business. We will see more of consolidation in this category during 2017."

Credit Unions

Loan approval rates at credit unions dropped to a new Index low of 40.8% in January.

"Credit unions are hoping that the MBL lending cap could go up with a new regime in Washington," Arora says. "Otherwise, credit union lending to small businesses will likely remain stagnant."