Small Biz Loan Approval Rates Drop at Big Banks and Alternative Lenders in July 2016, According to Biz2Credit Small Business Lending Index
Institutional Lenders and Small Banks Fill Void
Loan approval rates at big banks ($10 billion+ in assets), alternative lenders, and credit unions dipped in July 2016, according to the most recent Biz2Credit Small Business Lending IndexsuperscriptstartTMsuperscruptend, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. Meanwhile, institutional lenders and small banks filled the void, approving loans at higher rates last month.
Big Banks
Big banks Small business loan approval rates at big banks ($10 billion+ in assets) dropped to 23.1% in July, down two-tenths of a percent from June's figure.
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" The economy in the second quarter was a bit sluggish because of slower global growth; this impacts big banks more than other lenders."
Rohit Arora, Biz2Credit CEO
"When there is turbulence in international markets, such as the angst over Britain's laving the EU, big banks tend to become more conservative in their lending. Brexit had some impact, but not a major one, on small business finance."
Rohit Arora, Biz2Credit CEO
Small Banks
Meanwhile, lending approval rates increased slightly at small banks up to 48.9% in July.
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"Small banks process more SBA-backed loans than big banks do. SBA loans minimize the overall risk assumed when loan requests are approved". "The current state of the global market doesn't have as much influence on small banks as it does with big banks. They filled the void in July when the big banks skidded a little bit."
Rohit Arora, Biz2Credit CEO
Institutional lenders
Institutional lenders' loan approval rates bounced back in July to 62.8%, matching an all-time Index high.
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"Over the last two years, institutional lenders have emerged as a strong driving force in the industry and continue to provide affordable loan products to borrowers with high rates of success", one of the nation's leading experts on small business finance. "This category of lender is doing well because of high yields and low default rates. Further, institutional investors from other countries are looking to enter the U.S. market as there currently is much global uncertainty, especially in Europe. This is encouraging for small business owners and start-ups seeking capital. I expect this trend to continue."
Rohit Arora, Biz2Credit CEO
Alternative lenders
Alternative lenders experienced a decrease in loan approval rates in July and approved three out of five loan requests (60%). However, this category of lenders experienced a decrease in loan approval rates in four out of the last five months.
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"Alternative lenders have steadily lost favor among small business borrowers, in large part because their cost of capital is so high". "Credit-worthy borrowers can typically secure better interest rates and terms from other types of lenders. Alternative lenders still have some appeal for borrowers whose credit scores might be low."
Rohit Arora, Biz2Credit CEO
Credit unions
Credit unions continued their slow decline in loan approval rates, drop to an all-time Index low of 41.5% in July, down one-tenth of a percent from June. Loan approval percentage rates have declined at credit unions every month for more than a year.
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"Credit unions are behind in the times when it comes to utilizing digital technology. This slows down the loan process significantly". "Borrowers prefer to receive the funding from their loan requests as quick as possible, and thus are opting to competing categories of lenders from whom they can receive funding faster."
Rohit Arora, Biz2Credit CEO
View Past Months
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| April 2020 |
Small Business Loan Approval Rates Dropped to Record Lows in April 2020: Biz2Credit Small Business Lending Index™ |
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PPP Lending Dominates Small Business Lending, but Some Companies Applied for Non-CARES Act Funding |
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| March 2020 |
Small Business Loan Approval Rates Plummet in March 2020: Biz2Credit Small Business Lending Index™ |
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All Categories of small business lenders nosedive as coronavirus wreaks havoc on the economy |
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| February 2020 |
Small Business Loan Approval Rates at Big Banks Remain at Record High in February 2020: Biz2Credit Small Business Lending Index™ |
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Small Banks and Alternative Lenders drop, and Credit Unions remain at all-time low |
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| January 2020 |
Small Business Loan Approval Rates at Big Banks Reach New Record in January 2020: Biz2Credit Small Business Lending Index™ |
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Small banks drop slightly, while Credit Unions hit new bottom |
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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.